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Callable bull/bear contracts, call auction sessions, and price manipulations: Evidence from Hong Kong

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  • Adrian C. H. Lei
  • Xiaorong Ma
  • Martin H. Y. Yick

Abstract

Call auction sessions are widely adopted to improve the price discovery process. The suspension of the closing call auction session (CAS) of the Hong Kong Stock Exchange (HKEx) in 2009 and the reintroduction of an enhanced CAS in 2016 provide us a unique experimental environment to assess the effectiveness of the two different CAS models in reducing market manipulation. In examining the probability of mandatory call events (MCEs) of callable bull/bear contracts (CBBCs), we find the enhanced CAS model being more effective in price manipulation reduction. We also find the enhanced CAS reducing price manipulation in the preopening auction session.

Suggested Citation

  • Adrian C. H. Lei & Xiaorong Ma & Martin H. Y. Yick, 2020. "Callable bull/bear contracts, call auction sessions, and price manipulations: Evidence from Hong Kong," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(11), pages 1731-1750, November.
    • Handle: RePEc:wly:jfutmk:v:40:y:2020:i:11:p:1731-1750
    DOI: 10.1002/fut.22105
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    References listed on IDEAS

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    Cited by:

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    2. Kyong Shik Eom & Kyung Yoon Kwon & Sung Chae La & Jong-Ho Park, 2022. "Dynamic and Static Volatility Interruptions: Evidence from the Korean Stock Markets," JRFM, MDPI, vol. 15(3), pages 1-19, February.

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