Improved Auction Price Mechanism for Electronic Security Trading Platform
25 Pages Posted: 27 Aug 2010 Last revised: 10 Dec 2012
Date Written: December 8, 2012
Abstract
By reviewing the current Xetra auction price mechanism and analyzing its economic properties, we discover that Xetra auction price is generically non market-clearing and that only limit prices are considered as Xetra auction price, which prevents a market-clearing price but not a limit price from being Xetra auction price even when this situation exists in the market. Then we construct in a step-by-step manner improved auction pricing rules that serve as an improvement on Xetra auction pricing rules from the perspective of market efficiency.
Keywords: Market Microstructure, Multi-Unit Double Auction, Electronic Security Trading Platform, Xetra
JEL Classification: D4, D5, G1
Suggested Citation: Suggested Citation