Call of Duty: Designated Market Maker Participation in Call Auctions

44 Pages Posted: 21 Aug 2021

See all articles by Erik Theissen

Erik Theissen

University of Mannheim - Finance Area

Christian Westheide

University of Vienna - Department of Finance; Leibniz Institute for Financial Research SAFE

Date Written: August 2021

Abstract

Many equity markets combine continuous trading and call auctions. Oftentimes designated market makers (DMMs) supply additional liquidity. Whereas prior research has focused on their role in continuous trading, we provide a detailed analysis of their activity in call auctions. Using data from Germany’s Xetra system, we find that DMMs are most active when they can provide the greatest benefits to the market, i.e., in relatively illiquid stocks and at times of elevated volatility. Their trades stabilize prices and they trade profitably.

Keywords: Designated market makers, Call auctions

JEL Classification: G10

Suggested Citation

Theissen, Erik and Westheide, Christian, Call of Duty: Designated Market Maker Participation in Call Auctions (August 2021). SAFE Working Paper No. 319, Available at SSRN: https://ssrn.com/abstract=3908001 or http://dx.doi.org/10.2139/ssrn.3908001

Erik Theissen

University of Mannheim - Finance Area ( email )

Mannheim, 68131
Germany

Christian Westheide (Contact Author)

University of Vienna - Department of Finance ( email )

Bruennerstrasse 72
Vienna, 1210
Austria

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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