Can Random Auction Ending Curb Market Manipulation?

45 Pages Posted: 20 Jun 2019

See all articles by Yiping Lin

Yiping Lin

Capital Markets CRC Limited (CMCRC)

David Michayluk

University of Technology Sydney (UTS) - School of Finance and Economics; Financial Research Network (FIRN); Centre for International Finance and Regulation (CIFR)

Mi Zou

Nankai University - School of Economics

Date Written: June 15, 2019

Abstract

This paper examines whether a randomized auction ending time reduces market manipulation. Using the random auction ending rule implemented on the Singapore Exchange, we examine changes in indicators of market manipulation and market efficiency. We find that end of day price swings and price dislocation probability both declined, suggesting a lower risk of market manipulation. In addition, the variance ratio and market-adjusted return volatility measures have decreased indicating a more efficient and less volatile price discovery process. We do note that there are still telltale signs of manipulation in the pre-auction opening and pre-closing phase suggesting that the length of time of this phase is important. Overall, our results indicate that the randomized auction ending can curb market manipulation and improve price efficiency.

Keywords: Market Manipulation, Random Auction Ending, Price Efficiency

JEL Classification: G12, G14, G18, K22

Suggested Citation

Lin, Yiping and Michayluk, David and Zou, Mi, Can Random Auction Ending Curb Market Manipulation? (June 15, 2019). Available at SSRN: https://ssrn.com/abstract=3404507 or http://dx.doi.org/10.2139/ssrn.3404507

Yiping Lin (Contact Author)

Capital Markets CRC Limited (CMCRC) ( email )

Level 2, 55 Harrington Street, The Rocks
Sydney, 2000
Australia

David Michayluk

University of Technology Sydney (UTS) - School of Finance and Economics ( email )

Finance Discipline Group
UTS Business
Sydney, NSW 2007
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Centre for International Finance and Regulation (CIFR) ( email )

Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

Mi Zou

Nankai University - School of Economics ( email )

Wenjin Road
Tianjin, TianJin 300071
China

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