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

63 Pages Posted: 28 May 2020 Last revised: 8 Apr 2021

See all articles by Edwin Hu

Edwin Hu

New York University School of Law

Dermot Murphy

University of Illinois at Chicago

Date Written: May 13, 2020

Abstract

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

Hu, Edwin and Murphy, Dermot, Vestigial Tails? Floor Brokers at the Close in Modern Electronic Markets (May 13, 2020). 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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