A trading mechanism contingent on several indices

Henry Schellhorn

European Journal of Operational Research, 2011, vol. 213, issue 3, 551-558

Abstract: We introduce a trading mechanism where the execution of an order on a security can be made contingent on the relation between the clearing price of the security and the clearing price of one or several indices. A mechanism similar to ours, but limited to only one index, was implemented on the Tel Aviv Stock Exchange. We argue that it is in some cases crucial to make the execution of an order contingent on several indices. Our mechanism consists of a particular implementation of a double-sided multi-unit combinatorial auction with substitutes (or DMCS auction), which we introduced in an earlier article.

Keywords: Trading; systems; Limit; orders; Market; microstructure (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:213:y:2011:i:3:p:551-558

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