Closing Call Auctions and Liquidity
25 Pages Posted: 9 Apr 2003
Date Written: February 2005
This paper examines the impact of closing call auctions on liquidity. It exploits the natural experiment offered by the introduction of a closing call auction on the Australian Stock Exchange on 10 February, 1997. The introduction of the closing call auction is associated with a reduction in trading volume at the close of continuous trading. However, bid ask spreads during continuous trading are largely unaffected by the introduction of the closing call auction. Therefore, closing call auctions consolidate liquidity at a single point in time without having any adverse effect on the cost of trading.
Keywords: Closing call auctions, liquidity
JEL Classification: G10, G14
Suggested Citation: Suggested Citation