Call auctions with contingent orders (Q6105129)

The authors investigations deals with the empirical analysis of opening and/or closing call auctions. More precisely, a new call auction mechanism -- ``call auctions with contingent orders'' with an innovative algorithm is proposed. This unique design incorporates contingent claims (buy stock A, if selling stock B) into the price discovery process. It is shown that higher liquidity during the call auctions is achieved, as well as lower volatility after the call auctions. Moreover, the authors show that current call auctions and the proposed mechanism have similar incentive properties. The general idea of these auctions is demonstrated in Section 2.2. In Section 2, the authors introduce the current call auction mechanism and the proposed call auction mechanism with contingent orders. The incentive properties of both types of call auctions are studied in Section 3. Section 4 concludes and flags future research.