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Heading
for the close
As volumes seemingly continue to migrate towards the end of the
trading day, Hayley McDowell investigates the rise of closing auctions in
Europe and its impact on continuous trading for asset managers.
A
s 2019, and indeed the
decade, draws to a close,
buy-side traders and mar-
ket operators across Europe have
been adapting to a recent trend
which has made the final phase of
the trading day the most crucial
by far. In what is often referred
to as a ‘unique liquidity event’,
national stock exchanges conduct a
five-minute closing auction session
after continuous trading has ended,
during which the fundamental
process of establishing fair closing
prices on securities is carried
out. While some traders consider
the closing auction to be a ‘safe
haven’ in terms of gaining that
official closing price, others are
uneasy about the trend’s impact on
intraday liquidity and continuous
trading.
50 // TheTrade // Winter 2019
Around three years ago, closing
auction volumes in major indi-
ces across Europe accounted for
approximately 16% of total order
book volume, but now closing
auction volumes consistently
account for more than 20%. The
development is more noticeable
in some European markets than
others. In France, for example, data
from the Autorité des Marchés
Financiers (AMF) revealed that
volumes of shares traded in closing
auctions has climbed from between
20% and 28% through to 2015, to a
significant 41% traded on Euronext
Paris for CAC 40 stocks in June
2019.
While closing auctions are oper-
ated exclusively by the European
national exchanges, such as the
London Stock Exchange, Euronext