The Role of Pre-Opening Mechanisms in Fragmented Markets

Selma Boussetta, Laurance Lescourret and Sophie Moinas

No 12, EconPol Working Paper from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

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.

Date: 2018
New Economics Papers: this item is included in nep-mst
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Citations: View citations in EconPapers (4)

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Working Paper: The role of pre-opening mechanisms in fragmented markets (2018)
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