The Impact of Closing Call Auction on Liquidity and Price Discovery Process: An Analysis on the Stock Exchange of Hong Kong
31 Pages Posted: 12 Aug 2011
Date Written: August 12, 2011
In 2008 The Hong Kong stock exchange introduced a closing call auction, which was subsequently removed in March 2009 after instances of market manipulation1. This paper examines the impact of the introduction and suspension of the closing call auction on market quality. Our empirical analysis finds that the introduction of the closing calls leads to an increases in transaction costs. The percentage of daily volume traded in the closing call auction is high, and the price discovery process is improved. Overall, the suspension of the closing call auction leads to a decrease in market quality.
Suggested Citation: Suggested Citation