Effectiveness of Trading Pauses: Evidence from the Tokyo Stock Exchange

Akitada Kasahara () and Masahiro Yamada ()
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Akitada Kasahara: Graduate School of Economics, the University of Osaka
Masahiro Yamada: School of Management, Tokyo University of Science

No 26-03-Rev., Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: We estimate the causal effect of single-stock trading pauses on market quality using tick-by-tick order book data from the Tokyo Stock Exchange (TSE). Using percentage distances to yen-denominated triggering thresholds as an instrument, we find that pauses extending the opening auction reduce subsequent volatility by roughly a quarter, consistent with reduced transitory price variation. Order flows suggest that extra auction time lets aggressively priced limit orders offset the initial imbalance. Reductions are larger for stocks with lower turnover and smaller after overnight price declines. We detect no robust volatility reduction for pauses interrupting continuous trading.

Keywords: Trading pauses; Circuit breakers; Volatility; Liquidity; Price discovery (search for similar items in EconPapers)
JEL-codes: G12 G14 G18 (search for similar items in EconPapers)
Pages: 71 pages
Date: 2026-03, Revised 2026-10
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