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The Role of Pre-Opening Mechanisms in Fragmented Markets

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  • Selma Boussetta
  • Laurance Lescourret
  • Sophie Moinas

Abstract

Liquidity issues in financial markets arise because of two main factors: asymmetric information and cost of market participation. To alleviate these frictions, several exchanges start with a pre-opening period characterized by the accumulation of orders and the absence of trading. What is the role of Euronext’s pre-opening mechanism in the price discovery and liquidity formation of the exchange itself versus two other competing venues deprived of such a mechanism, namely BATS and Chi-X? EconPol expert Sophie Moinas (TSE) and her co-authors find evidence that tentative clearing prices set during the pre-opening period contribute to discover opening price; and that tentative clearing volume is positively correlated with liquidity across all three platforms.

Suggested Citation

  • Selma Boussetta & Laurance Lescourret & Sophie Moinas, 2018. "The Role of Pre-Opening Mechanisms in Fragmented Markets," EconPol Working Paper 12, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:econwp:_12
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    References listed on IDEAS

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    Cited by:

    1. Ligot, Stephanie & Gillet, Roland & Veryzhenko, Iryna, 2021. "Intraday volatility smile: Effects of fragmentation and high frequency trading on price efficiency," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).
    2. Bellia, Mario & Pelizzon, Loriana & Subrahmanyam, Marti & Uno, Jun & Yuferova, Darya, 2017. "Coming early to the party," SAFE Working Paper Series 182, Leibniz Institute for Financial Research SAFE.
      • Mario Bellia & Loriana Pelizzon & Marti G. Subrahmanyam & Jun Uno & Darya Yuferova, 2020. "Coming early to the party," Working Papers 2020:11, Department of Economics, University of Venice "Ca' Foscari".
    3. Damien Challet & Nikita Gourianov, 2018. "Dynamical regularities of US equities opening and closing auctions," Papers 1802.01921, arXiv.org, revised Oct 2018.
    4. Damien Challet, 2018. "Strategic behaviour and indicative price diffusion in Paris Stock Exchange auctions," Papers 1807.00573, arXiv.org.

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