Call of duty: Designated market maker participation in call auctions

Erik Theissen and Christian Westheide

Journal of Financial Markets, 2020, vol. 49, issue C

Abstract: Many equity markets combine continuous trading and call auctions. Oftentimes designated market makers (DMMs) supply additional liquidity. Whereas prior research has focused on their role in continuous trading, we provide a detailed analysis of their activity in call auctions. Using data from Germany's Xetra system, we find that DMMs are most active when they can provide the greatest benefits to the market, i.e., in relatively illiquid stocks and at times of elevated volatility. Their trades stabilize prices and they trade profitably.

Keywords: Designated market makers; Call auctions (search for similar items in EconPapers)
JEL-codes: G10 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:49:y:2020:i:c:s138641811930360x

DOI: 10.1016/j.finmar.2019.100530

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