AHEAD: Ad Hoc Electronic Auction Design

53 Pages Posted: 28 Dec 2020

See all articles by Joffrey Derchu

Joffrey Derchu

Ecole Polytechnique, Palaiseau - CMAP CNRS-UMR 7641 and Ecole Polytechnique

Philippe Guillot

affiliation not provided to SSRN

Thibaut Mastrolia

Ecole Polytechnique, Palaiseau - CMAP CNRS-UMR 7641 and Ecole Polytechnique

Mathieu Rosenbaum

Ecole Polytechnique, Palaiseau

Date Written: October 5, 2020

Abstract

We introduce a new matching design for financial transactions in an electronic market. In this mechanism, called ad hoc electronic auction design (AHEAD), market participants can trade between themselves at a fixed price and trigger an auction when they are no longer satisfied with this fixed price. In this context, we prove that a Nash equilibrium is obtained between market participants. Furthermore, we are able to assess quantitatively the relevance of ad hoc auctions and to compare them with periodic auctions and continuous limit order books. We show that from the investors’ viewpoint, the microstructure of the asset is usually significantly improved when using AHEAD.

Keywords: Market microstructure, market design, financial regulation, ad-hoc auctions, periodic auctions, limit order book, Nash equilibrium

Suggested Citation

Derchu, Joffrey and Guillot, Philippe and Mastrolia, Thibaut and Rosenbaum, Mathieu, AHEAD: Ad Hoc Electronic Auction Design (October 5, 2020). Available at SSRN: https://ssrn.com/abstract=3705514 or http://dx.doi.org/10.2139/ssrn.3705514

Joffrey Derchu (Contact Author)

Ecole Polytechnique, Palaiseau - CMAP CNRS-UMR 7641 and Ecole Polytechnique ( email )

Route de Saclay
Palaiseau, 91128
France

Philippe Guillot

affiliation not provided to SSRN

Thibaut Mastrolia

Ecole Polytechnique, Palaiseau - CMAP CNRS-UMR 7641 and Ecole Polytechnique ( email )

Route de Saclay
Palaiseau, 91128
France

Mathieu Rosenbaum

Ecole Polytechnique, Palaiseau ( email )

Route de Saclay
Palaiseau, 91128
France

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