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Call Auctions: A Solution to Some Difficulties in Indian Finance

  • Susan Thomas

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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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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
Note: Institutional Papers
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  1. Andrew Ellul & Hyun Song Shin & Ian Tonks, 2004. "Opening and closing the market: evidence from the London Stock Exchange," LSE Research Online Documents on Economics 24753, London School of Economics and Political Science, LSE Library.
  2. Madhavan, Ananth, 1992. " Trading Mechanisms in Securities Markets," Journal of Finance, American Finance Association, vol. 47(2), pages 607-41, June.
  3. Henke, Harald & Voronkova, Svitlana, 2005. "Price limits on a call auction market: Evidence from the Warsaw Stock Exchange," International Review of Economics & Finance, Elsevier, vol. 14(4), pages 439-453.
  4. Maria Kasch-Haroutounian & Erik Theissen, 2009. "Competition between Exchanges: Euronext versus Xetra," European Financial Management, European Financial Management Association, vol. 15(1), pages 181-207.
  5. Bruce Mizrach & Christopher J. Neely, 2006. "The transition to electronic communications networks in the secondary treasury market," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 527-542.
  6. 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, vol. 20(4), pages 303-315.
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