Vestigial Tails? Floor Brokers at the Close in Modern Electronic Markets

57 Pages Posted: 28 May 2020 Last revised: 26 Oct 2021

See all articles by Edwin Hu

Edwin Hu

New York University School of Law

Dermot Murphy

University of Illinois at Chicago

Date Written: October 22, 2021

Abstract

We study closing auction market quality on NYSE and Nasdaq. Closing auction volume for a stock is near-exclusive to its listing exchange, and now accounts for over 10% of its total volume. NYSE floor brokers can submit auction orders later than other traders, and their orders remain hidden until minutes before auction clearance. We show that auction information is less accurate and closing price efficiency is significantly worse on NYSE due to the late submission option. Auction quality improves when NYSE halted floor trading during the COVID-19 pandemic. Our results highlight the tradeoff between auction flexibility and efficiency.

Keywords: closing auctions, floor brokers, auction efficiency, D-Orders, COVID-19

JEL Classification: G12, G14, D44

Suggested Citation

Hu, Edwin and Murphy, Dermot, Vestigial Tails? Floor Brokers at the Close in Modern Electronic Markets (October 22, 2021). Available at SSRN: https://ssrn.com/abstract=3600230 or http://dx.doi.org/10.2139/ssrn.3600230

Edwin Hu

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

Dermot Murphy (Contact Author)

University of Illinois at Chicago ( email )

2114 University Hall (UH)
601 S. Morgan Street
Chicago, IL 60607-7124
United States
312-355-4372 (Phone)

HOME PAGE: http://sites.google.com/site/murphyderm

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