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Transparency and Ending Times of Call Auctions: A Comparison of Euronext and Xetra

Author

Listed:
  • Jos van Bommel
  • Peter Hoffmann

    (LSF)

Abstract

We compare the call auction mechanisms of two major European stock exchanges. The French Euronext auctions disclose five levels of limit orders and have fixed ending times. The German Xetra auctions only disclose the virtual clearing price and volume, and have random ending times. For a sample of 126 matched stocks over a two year period, we find that Euronext auctions are more liquid, contribute more to price discovery, and are followed by lower bid-ask spreads. Both exchanges see significant reversals after their auctions, implying positive expected profits for liquidity suppliers. We also find that small stocks see relatively high turnover at the open while large stocks trade more during the close.

Suggested Citation

  • Jos van Bommel & Peter Hoffmann, 2011. "Transparency and Ending Times of Call Auctions: A Comparison of Euronext and Xetra," DEM Discussion Paper Series 11-9, Department of Economics at the University of Luxembourg.
    • Handle: RePEc:luc:wpaper:11-9
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    File URL: http://wwwen.uni.lu/content/download/53153/634704/file/Transparency%20and%20Ending%20Times%20of%20Call%20Auctions_A%20Comparison%20of%20Euronext%20and%20Xetra_2011(9).pdf
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    Cited by:

    1. Lescourret, Laurence, 2012. "Non-Fundamental Information and Market-Makers' Behavior during the NASDAQ Preopening Session," ESSEC Working Papers WP1212, ESSEC Research Center, ESSEC Business School.
    2. Oliver Linton & Soheil Mahmoodzadeh, 2018. "Implications of High-Frequency Trading for Security Markets," Annual Review of Economics, Annual Reviews, vol. 10(1), pages 237-259, August.
    3. repec:hal:journl:hal-00772798 is not listed on IDEAS

    More about this item

    Keywords

    The Market Microstructure; Call Auctions;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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