On Frequent Batch Auctions for Stocks

Ravi Jagannathan*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

I show that frequent batch auctions for stocks have the potential to reduce the severity of stock price crashes when they occur. For a given sequence of orders from a continuous electronic limit order book market, matching orders using one-second apart batch auctions results in nearly the same trades and prices. Increasing the time interval between auctions to one minute significantly reduces the severity stock price crashes. In spite of this and other advantages pointed out in the literature, frequent batch auctions have not caught on. There is a need for carefully designed market experiments to understand why and what aspect of reality academic research may be missing.

Original languageEnglish (US)
Pages (from-to)1-17
Number of pages17
JournalJournal of Financial Econometrics
Volume20
Issue number1
DOIs
StatePublished - 2022

Keywords

  • continuous trading
  • flash crash
  • frequent batch auctions
  • G00
  • G1
  • G12
  • G14
  • G18
  • G2
  • HFT
  • high-frequency trading
  • limit order book
  • liquidity
  • trading mechanisms

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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