Callable bull/bear contracts, call auction sessions, and price manipulations: Evidence from Hong Kong

Adrian C. H. LEI*, Xiaorong MA, Martin H. Y. YICK

*Corresponding author for this work

Research output: Journal PublicationsJournal Article (refereed)

Abstract

Call auction sessions are widely adopted to improve the price discovery pro-cess. The suspension of the closing call auction session (CAS) of the HongKong Stock Exchange (HKEx) in 2009 and the reintroduction of an enhancedCAS in 2016 provide us a unique experimental environment to assess theeffectiveness of the two different CAS models in reducing market manipula-tion. In examining the probability of mandatory call events (MCEs) of callablebull/bear contracts (CBBCs), we find the enhanced CAS model being moreeffective in price manipulation reduction. We also find the enhanced CASreducing price manipulation in the preopening auction session.
Original languageEnglish
JournalJournal of Futures Markets
DOIs
Publication statusE-pub ahead of print - 13 Feb 2020

Fingerprint

Hong Kong
Call auction
Price manipulation
Price discovery
Stock exchange
Auctions

Bibliographical note

We would like to thank the editor (Robert Webb) for his valuable suggestions, which greatly improved the paper. We also thank the participants of 2019 International Conference on Futures and Other Derivative Markets for their suggestions. We acknowledge the financial support from University of Macau (Reference No. MYRG2014‐0039‐FBA and MYRG2016‐00233‐FBA).

The data that support the findings of this study are available from Hong Kong Exchange and Clearing Ltd. (HKEx).Restrictions apply to the availability of these data, which can be acquired with a data fee.

Keywords

  • callable bull/bear contracts
  • closing auction session
  • manipulation
  • price reversals

Cite this

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title = "Callable bull/bear contracts, call auction sessions, and price manipulations: Evidence from Hong Kong",
abstract = "Call auction sessions are widely adopted to improve the price discovery pro-cess. The suspension of the closing call auction session (CAS) of the HongKong Stock Exchange (HKEx) in 2009 and the reintroduction of an enhancedCAS in 2016 provide us a unique experimental environment to assess theeffectiveness of the two different CAS models in reducing market manipula-tion. In examining the probability of mandatory call events (MCEs) of callablebull/bear contracts (CBBCs), we find the enhanced CAS model being moreeffective in price manipulation reduction. We also find the enhanced CASreducing price manipulation in the preopening auction session.",
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Callable bull/bear contracts, call auction sessions, and price manipulations: Evidence from Hong Kong. / LEI, Adrian C. H.; MA, Xiaorong; YICK, Martin H. Y.

In: Journal of Futures Markets, 13.02.2020.

Research output: Journal PublicationsJournal Article (refereed)

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