Call of duty: Designated market maker participation in call auctions

DOI:	https://doi.org/10.1016/j.finmar.2019.100530
URL:	https://www.sciencedirect.com/science/article/abs/...
Additional URL:	https://www.semanticscholar.org/paper/Call-of-duty...
Document Type:	Article
Year of publication:	2020
The title of a journal, publication series:	Journal of Financial Markets
Volume:	49
Page range:	Article 100530
Place of publication:	Amsterdam [u.a.]
Publishing house:	Elsevier
ISSN:	1386-4181
Publication language:	English
Institution:	Business School > ABWL u. Finanzierung (Theissen 2009-)
Subject:	330 Economics
Abstract:	Many equity markets combine continuous trading and call auctions. Oftentimes designated market makers (DMMs) supply additional liquidity. Whereas prior research has focused on their role in continuous trading, we provide a detailed analysis of their activity in call auctions. Using data from Germany's Xetra system, we find that DMMs are most active when they can provide the greatest benefits to the market, i.e., in relatively illiquid stocks and at times of elevated volatility. Their trades stabilize prices and they trade profitably.