Is There an Optimal Closing Mechanism?

62 Pages Posted: 1 Oct 2015

See all articles by Nicholas Cordi

Nicholas Cordi

University of Sydney Business School

Sean Foley

Macquarie University

Tālis J. Putniņš

University of Technology Sydney (UTS); Stockholm School of Economics, Riga

Date Written: April 10, 2015


We study the effects on market efficiency and integrity of introducing closing auctions in 20 exchanges around the world. We delineate two main categories of closing auction (those in which on-close orders can be entered through out the day, and those with a distinct end-of-day auction period) and examine four auction design features. We find that closing auctions significantly improve market quality, with on-close mechanisms providing the greatest benefits. Closing auctions tend to be more beneficial if they have randomized closing times, extensions if volatility thresholds are breached, prevent traders from altering their orders during the pre-close time, and do not display indicative closing prices.

Keywords: Closing Auction, Manipulation, auction design

JEL Classification: G14, G18, G38

Suggested Citation

Cordi, Nicholas and Foley, Sean and Putnins, Talis J., Is There an Optimal Closing Mechanism? (April 10, 2015). Available at SSRN: or

Nicholas Cordi

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006

Sean Foley (Contact Author)

Macquarie University ( email )

North Ryde
Sydney, New South Wales 2109
0417702600 (Phone)

Talis J. Putnins

University of Technology Sydney (UTS) ( email )

PO Box 123
+61 2 9514 3088 (Phone)

Stockholm School of Economics, Riga ( email )

Strelnieku iela 4a
Riga, LV 1010
+371 67015841 (Phone)

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