Call of duty : designated market maker participation in call auctions

URL:	https://www.econstor.eu/handle/10419/146774?locale...
Weitere URL:	http://www.cfr-cologne.de/download/workingpaper/cf...
Dokumenttyp:	Arbeitspapier
Erscheinungsjahr:	2016
Titel einer Zeitschrift oder einer Reihe:	CFR Working Paper
Band/Volume:	16-05
Ort der Veröffentlichung:	Köln
Verlag:	Centre for Financial Research
Sprache der Veröffentlichung:	Englisch
Einrichtung:	Fakultät für Betriebswirtschaftslehre > ABWL u. Finanzierung (Theissen 2009-)
Fachgebiet:	330 Wirtschaft
Abstract:	Many equity markets employ designated market makers to supply additional liquidity for small and mid caps, and they use a hybrid trading system that combines continuous trading sessions and call auctions. We use data from Germany's Xetra system to analyze designated market maker activity in the call auctions. We find that their participation rates are negatively related to the liquidity of the stocks, that they are more active at times of elevated volatility, that they stabilize prices, and that they earn positive trading profits. These results imply that designated market makers provide a valuable service to the market, and that they charge an implicit price for that service.