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

67 Pages Posted: 28 May 2020 Last revised: 30 Dec 2022

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

Closing auctions are an increasingly important trading mechanism for passive funds that require
closing price execution. However, differences in auction mechanism design on NYSE and
Nasdaq may affect closing auction price efficiency. In particular, NYSE floor brokers can
submit orders later than other traders, and these orders remain hidden until minutes before
auction clearance. We show that NYSE closing prices are less efficient and NYSE pre-auction
information is less accurate due to the late submission option. However, auction quality
improved when NYSE halted floor trading during the COVID-19 pandemic. Our results
highlight an important 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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
795
Abstract Views
4,230
Rank
47,429
PlumX Metrics