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.
Bibliographical noteWe 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.
- callable bull/bear contracts
- closing auction session
- price reversals