Title: Sniping to Manipulate Closing Prices in Call Auctions: Evidence from the Hong Kong Stock Exchange
Reference Number: 1200
Publication Date: September 2012

Wing Suen
University of Hong Kong

Kam-Ming Wan
Hong Kong Polytechnic University

The Hong Kong Stock Exchange briefly adopted call auctions as its closing mechanism. We find evidence of abnormally large orders and price changes during the last five seconds of the auction sessions. Such sniping attacks were associated with the expiration of derivative products, which provided an incentive for price manipulation. Prices had a tendency to revert the day following a sniping attack. Although prices were on average more informative in a closing auction procedure than in a random closing procedure, they were more prone to manipulation attempts.

Last modified: 11/14/2012