Vestigial Tails? Floor Brokers at the Close in Modern Electronic Markets
67 Pages Posted: 28 May 2020 Last revised: 2 Oct 2020
Date Written: May 13, 2020
Closing auction volume is steadily increasing on NYSE and Nasdaq, and now represents over 10% of trading volume. The NYSE closing auction design is highly advantageous to NYSE floor brokers, who have near-exclusive access to the auction from 3:50 pm to 4:00 pm. We show that closing auction quality, as measured by the accuracy of closing auction information feeds and efficiency of closing prices, is significantly worse on NYSE. However, closing auction market quality generally improved when NYSE halted floor trading during the COVID-19 pandemic. We use "triple-witching" days and portfolio-rebalancing days as instruments for auction interest to further show that NYSE closing auction quality is less resilient to liquidity demand shocks.
Keywords: closing auctions, floor brokers, auction efficiency, D-Orders, COVID-19
JEL Classification: G12, G14, D44
Suggested Citation: Suggested Citation