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Call Auctions: A Solution to Some Difficulties in Indian Finance

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  • Susan Thomas

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Abstract

Call auctions represent an alternative strategy, where the order ow over a certain time period is pooled, and the market-clearing price obtained through an aggregated supply and demand curve. Call auctions trade off instantaneity of order execution in favour of elimination of impact cost, and can achieve a more trusted price. They can improve the functioning of the market on issues such as market opening, market close, extreme news events, and potentially for illiquid securities including bonds. Call auctions could usefully replace some existing market rules such as `circuit breakers'. At the same time, there are many subtle elements in making a call auction market work, which require care in market design. [Working Paper No. 2010-006].

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Bibliographic Info

Paper provided by eSocialSciences in its series Working Papers with number id:2597.

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Date of creation: Jun 2010
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Handle: RePEc:ess:wpaper:id:2597

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Keywords: securities; bonds; call auctions; market; demand curve; Market microstructure; illiquid securities; circuit breakers; market; supply; clearing price;

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  1. Carole Comerton-Forde & James Rydge & Hayley Burridge, 2007. "Not all call auctions are created equal: evidence from Hong Kong," Review of Quantitative Finance and Accounting, Springer, Springer, vol. 29(4), pages 395-413, November.
  2. Henke, Harald & Voronkova, Svitlana, 2005. "Price limits on a call auction market: Evidence from the Warsaw Stock Exchange," International Review of Economics & Finance, Elsevier, Elsevier, vol. 14(4), pages 439-453.
  3. Christopher Battig & Patricia Chelley-Steeley, 2010. "The impact of the closing call auction: an examination of effects in London," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 20(4), pages 303-315.
  4. Huang, Yu Chuan, 2004. "The market microstructure and relative performance of Taiwan stock index futures: a comparison of the Singapore exchange and the Taiwan futures exchange," Journal of Financial Markets, Elsevier, Elsevier, vol. 7(3), pages 335-350, June.
  5. Maria Kasch-Haroutounian & Erik Theissen, 2009. "Competition between Exchanges: Euronext versus Xetra," European Financial Management, European Financial Management Association, European Financial Management Association, vol. 15(1), pages 181-207.
  6. Madhavan, Ananth, 1992. " Trading Mechanisms in Securities Markets," Journal of Finance, American Finance Association, American Finance Association, vol. 47(2), pages 607-41, June.
  7. Bruce Mizrach & Christopher J. Neely, 2006. "The transition to electronic communications networks in the secondary treasury market," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue Nov, pages 527-542.
  8. Hyun Song Shin & Ian Tonks & Andrew Ellul, 2004. "Opening and Closing the Market: Evidence from the London Stock Exchange," FMG Discussion Papers, Financial Markets Group dp506, Financial Markets Group.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. India's privatisation problem
    by Ajay Shah in Ajay Shah's blog on 2011-06-10 19:47:00
  2. India’s Privatisation Problem
    by Ajay Shah in Citizen Economists on 2011-06-13 11:40:34
  3. Obtaining liquidity for illiquid stocks
    by Ajay Shah in Ajay Shah's blog on 2013-04-06 12:24:00
  4. Obtaining liquidity for illiquid stocks
    by Ajay Shah in Citizen Economists on 2013-04-08 17:00:45
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Cited by:
  1. Nidhi Aggarwal & Susan Thomas, 2011. "When do stock futures dominate price discovery," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2011-016, Indira Gandhi Institute of Development Research, Mumbai, India.

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