Call auctions: A Solution to some difficulties in Indian finance
AbstractThe Indian financial system has been revolutionised by the application of a new market design: continuous trading with an anonymous limit order book at NSE and BSE. However, in certain situations, this market design has limitations. Call auctions represent an alternative strategy, where the order flow 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.
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Bibliographic InfoPaper provided by Indira Gandhi Institute of Development Research, Mumbai, India in its series Indira Gandhi Institute of Development Research, Mumbai Working Papers with number 2010-006.
Length: 47 pages
Date of creation: Jun 2010
Date of revision:
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Market microstructure; call auctions; illiquid securities; circuit breakers;
Other versions of this item:
- Susan Thomas, 2010. "Call Auctions: A Solution to Some Difficulties in Indian Finance," Working Papers id:2597, eSocialSciences.
- Susan Thomas, 2010. "Call auctions : A solution to some difficulties in Indian finance," Finance Working Papers 23028, East Asian Bureau of Economic Research.
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G19 - Financial Economics - - General Financial Markets - - - Other
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- India's privatisation problem
by Ajay Shah in Ajay Shah's blog on 2011-06-10 19:47:00
- Indias Privatisation Problem
by Ajay Shah in Citizen Economists on 2011-06-13 11:40:34
- Obtaining liquidity for illiquid stocks
by Ajay Shah in Ajay Shah's blog on 2013-04-06 12:24:00
- Obtaining liquidity for illiquid stocks
by Ajay Shah in Citizen Economists on 2013-04-08 17:00:45
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