Shanghai Stock Exchange Mulls Over Call Auction Closing Trading Price Mechanism
Liao Shumin
DATE:  Jun 04 2018
/ SOURCE:  Yicai
Shanghai Stock Exchange Mulls Over Call Auction Closing Trading Price Mechanism Shanghai Stock Exchange Mulls Over Call Auction Closing Trading Price Mechanism

(Yicai Global) June 4 -- As the deadline for public comment period the Shanghai Stock Exchange (SSE) has set for the revision of the relevant rules for closing trading price is in less than two weeks' time, which is June 17, the debate over the proposed changes has gained momemntum. SSE plans to adjust the closing trading mechanism and use closing bids to set the end of the session prices.

Adjusting the way the closing price is generated at the stock market is the main focus of the planned revision. The main revisions of the 'Transaction Rules' include adjusting the timing of continuous auction transactions, clearly closing the auction stage for the auction period from 2:57 p.m. to 3 p.m., adopting call auction trading mechanism.

Under such a mechanism, all prices included in the exchange mainframe during a fixed period of time will be treated equally, and there will no need to give priority to the time and the price in trading. The closing share price will be determined according to the principle of maximum volume, with the price determined to be called the call auction price and the process the call auction trading.

SSE currently adopts a continuous auction trading mechanism to finalize the closing stage. This means the daily closing price is determined by the average weighted price of the trading volume one minute before the last transaction. Under the existing mechanism, the closing price is easily affected by the large-scale order declaration at the end of the day, deviating significantly from the normal price level of the day and no longer suitable for serving as a benchmark price.

The use of a call auction trading mechanism helps maintain the price stability during the closing period, said Gui Haoming, chief market analyst from Shenyin & Wanguo Securities Research Institute, as cited by China's national radio website Cnr. The main purpose is to make the closing price more accurate and fully reflect the degree of investor's recognition of the price at the closing time.

The opening prices of both the Shanghai market and the Shenzhen market are determined by the call auction trading mechanism now, which avoids the distortion of the opening price caused by the individual's use of large funds in an instant large transaction, Gui said.

In the same way, the distortion of the closing price also needs to be addressed. The call auction trading mechanism has been adopted by the Shenzhen Stock Exchange in generating the closing price. The Shanghai Stock Exchange is also on the way of adopting it.

Editor: Mevlut Katik

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Keywords:   Shanghai Stock Exchange,Call Auction Trading Mechanism