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The Impact of the Suspension of Opening and Closing Call

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  • Silvio John Camilleri

    (Banking & Finance Dept., FEMA, University of Malta)

  • Christopher J. Green

    (Economics Dept., Loughborough University)

Abstract

A hotly debated issue in the market microstructure literature is the effectiveness of call auctions as against continuous trading systems. In this paper we investigate this issue by studying the impact of the suspension of opening and closing call auctions by the National Stock Exchange of India in 1999. We compare the volatility, efficiency and liquidity (VEL) of securities in the market before and after suspension, and estimate the value of the auctions to traders by carrying out an event study. Contrary to expectation, we find that VEL factors improved following the suspension, and the CARs were significant but were not uniformly positive or negative. As a partial explanation for these results, we find that less liquid stocks traded less in the auctions than did other securities, especially at the opening, and they experienced the most gains following the suspension. This suggests that less liquid stocks did not gain the expected benefits from the auctions, and therefore that it cannot be assumed that a call auction system will improve share trading in a less liquid emerging market. Future research in this area will need to pay attention to the composition of the shares being traded and to the nature of the trading process in different shares in the market.

Suggested Citation

  • Silvio John Camilleri & Christopher J. Green, 2004. "The Impact of the Suspension of Opening and Closing Call," Finance 0411012, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0411012
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    Cited by:

    1. Sangram Keshari Jena & Ashutosh Dash, 2015. "Is call auction efficient for better price discovery?," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 5(8), pages 102-113, August.
    2. Camilleri, Silvio John, 2006. "Strategic Priorities for Stock Exchanges in New EU Member States," MPRA Paper 62494, University Library of Munich, Germany.
    3. Susan Thomas, 2010. "Call auctions: A Solution to some difficulties in Indian finance," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2010-006, Indira Gandhi Institute of Development Research, Mumbai, India.

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    More about this item

    Keywords

    Call Auctions; stock markets; National Stock Exchange of India;
    All these keywords.

    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
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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