Sniping to Manipulate Closing Prices in Call Auctions: Evidence from the Hong Kong Stock Exchange

40 Pages Posted: 15 Feb 2011 Last revised: 30 Oct 2014

See all articles by Wing Suen

Wing Suen

The University of Hong Kong - School of Economics and Finance

Kam-Ming Wan

Hanken School of Economics

Date Written: March 11, 2013

Abstract

The Hong Kong Stock Exchange briefly adopted call auctions as its closing mechanism. We find evidence of abnormally large orders and price changes during the last five seconds of the auction sessions. Such sniping attacks were associated with the expiration of derivative products, which provided an incentive for price manipulation. Prices had a tendency to revert the day following a sniping attack. Although prices were on average more informative in a closing auction procedure than in a random closing procedure, they were more prone to manipulation attempts.

Keywords: Sniping, Closing Auction, Price Discovery, Price Manipulation

JEL Classification: D44, G14

Suggested Citation

Suen, Wing C. and Wan, Kam-Ming, Sniping to Manipulate Closing Prices in Call Auctions: Evidence from the Hong Kong Stock Exchange (March 11, 2013). Available at SSRN: https://ssrn.com/abstract=1761791 or http://dx.doi.org/10.2139/ssrn.1761791

Wing C. Suen

The University of Hong Kong - School of Economics and Finance ( email )

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Kam-Ming Wan (Contact Author)

Hanken School of Economics ( email )

PB 287
Vaasa, Vaasa 65101
Finland

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