Vestigial Tails? Floor Brokers at the Close in Modern Electronic Markets
63 Pages Posted: 28 May 2020 Last revised: 8 Apr 2021
Date Written: May 13, 2020
We study closing auction market quality on NYSE versus Nasdaq. Closing auctions now account for 10% of average volume, and trading is near-exclusive to the listing exchange. NYSE auction participants have more flexibility to submit and cancel orders through NYSE floor brokers. As a result, closing auction information is incomplete and closing price efficiency is worse on NYSE. Closing auction quality improved when NYSE halted floor trading during the COVID-19 pandemic. The reduced auction quality may not be justified by the flexibility to submit late orders. The higher broker fees and lack of closing volume competition raise additional welfare concerns.
Keywords: closing auctions, floor brokers, auction efficiency, D-Orders, COVID-19
JEL Classification: G12, G14, D44
Suggested Citation: Suggested Citation