scholarly journals Pricing Accuracy, Liquidity and Trader Behavior with Closing Price Manipulation

2010 ◽  
Author(s):  
Carole Comerton-Forde ◽  
Talis J. Putnins
Keyword(s):  
Price Manipulation ◽  
Closing Price

Measuring closing price manipulation

2011 ◽  
Vol 20 (2) ◽  
pp. 135-158 ◽  
Author(s):  
Carole Comerton-Forde ◽  
Tālis J. Putniņš
Keyword(s):  
Price Manipulation ◽  
Closing Price

scholarly journals Pricing accuracy, liquidity and trader behavior with closing price manipulation

2010 ◽  
Vol 14 (1) ◽  
pp. 110-131 ◽  
Author(s):  
Carole Comerton-Forde ◽  
Tālis J. Putniņš
Keyword(s):  
Price Manipulation ◽  
Closing Price

The impact of closing mechanism changes: evidence from the Shanghai stock market

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Dan Ma ◽  
Chunfeng Wang ◽  
Zhenming Fang ◽  
Ziwei Wang
Keyword(s):  
Stock Market ◽  
Market Quality ◽  
Market Manipulation ◽  
Trading Behavior ◽  
Content Type ◽  
Price Manipulation ◽  
Closing Price ◽  
Investor Trading ◽  
The Impact ◽  
Closing Mechanism

PurposeThe purpose of this paper is to empirically examine the impact of closing mechanism changes on market quality, investor trading behavior and market manipulation in the Shanghai stock market.Design/methodology/approachA dummy variable is constructed indicating whether the closing mechanism is call auction or continuous auction. Market quality is measured from aspects of liquidity, volatility and price continuity; investor trading behavior is scaled by order timing and order aggressiveness, and a price deviation indicator is the proxy of manipulation. Using panel regression, this study examines the impact of closing mechanism changes based on intraday transaction data from the Shanghai stock market.FindingsThe conclusions are as follows: First, market quality improves after the closing mechanism is reformed in terms of liquidity, volatility and price continuity. Second, order strategy changes significantly in the closing call market, and investors trade more aggressively in the continuous trading period before closing. Third, the closing call mechanism restrains the closing price manipulation and thus prompts an efficient closing price.Originality/valueThis paper examines the policy effects of closing mechanism changes from aspects of market quality, trading behavior and price manipulation, providing pieces of evidence for trading mechanism design and market supervision in emerging markets.

Measuring Closing Price Manipulation

2009 ◽  
Author(s):  
Carole Comerton-Forde ◽  
Talis J. Putnins
Keyword(s):  
Price Manipulation ◽  
Closing Price

Closing Call Auction Prices as Settlement Prices for Derivatives Contracts and Price Manipulation

2015 ◽  
Vol 23 (3) ◽  
pp. 439-473
Author(s):  
Sun-Joong Yoon
Keyword(s):  
Financial Markets ◽  
Financial Market ◽  
Economic Gain ◽  
Price Manipulation ◽  
Auction Price ◽  
Closing Price ◽  
Call Auction ◽  
Auction Prices ◽  
Administrative Penalty ◽  
Manipulation Case

Previous literature emphasizes the importance of a closing call auction system because it can not only improve the price discovery effect, but also mitigate the possibility of price manipulation. However, Korea Exchange, which has adopted a closing call auction system, has still suffered from the price manipulation, most cases of which are likely to be related to the derivatives contracts. Based on this environment, this paper investigates why KRX experiences the closing price manipulations so much, even though it adopted the closing call auction system. Generally, a price manipulation occurs when the legal/administrative penalty is less than the expected economic gain or when a specific market structure increases an incentive to manipulate the price. In this paper, we find that the adoption of a closing call auction price as a settlement price for KOSPI derivatives contracts strengthens the incentive for closing price manipulation, which is supported by Kyle (2007). Kyle (2007) shows that if a closing price is used as a settlement price and investors can execute the ‘market-on-expiration orders’ surely, the derivatives with cash settlement are susceptible to the price manipulation such as squeezing or cornering, equally as the derivatives with physical settlement. As such, KRX is the only financial market that satisfies the above conditions. This paper tries to verify this argument by introducing the Hong Kong Exchange case, the Korean ELS-related manipulation case and the Deutsche Bank case. Therefore, we strongly recommend changing the settlement price of KRX derivatives contracts into an average price, which is similar with the well-developed financial markets.

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