PT  - JOURNAL ARTICLE
AU  - Jeff Bacidore
AU  - Ben Polidore
AU  - Wenjie Xu
AU  - Cindy Y. Yang
TI  - Trading around the Close
AID  - 10.3905/jot.2012.8.1.048
DP  - 2012 Dec 31
TA  - The Journal of Trading
PG  - 48--57
VI  - 8
IP  - 1
4099  - https://pm-research.com/content/8/1/48.short
4100  - https://pm-research.com/content/8/1/48.full
AB  - In this paper, we discuss the issues a trader should consider when trading in and around the closing auction. Specifically, we describe the auction mechanisms used by the exchanges, including the order types offered and pre-auction information that the exchanges publish. We then provide an empirical analysis of trading volume, auction imbalances, and price reactions to imbalances, and discuss how a trader should use those findings to execute orders optimally. Our results suggest that algorithms meant to target the close should focus much of their open market trading to the period prior to the imbalance announcement, as opposed to just prior to the close itself. We also show that those algorithms should trade differently depending on whether the trade is a rebalance trade or a flow trade.TOPICS: Statistical methods, exchanges/markets/clearinghouses, portfolio management/multi-asset allocation