A trading mechanism contingent on several indices |
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Authors: | Henry Schellhorn |
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Institution: | School of Mathematical Sciences, Claremont Graduate University, United States |
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Abstract: | We introduce a trading mechanism where the execution of an order on a security can be made contingent on the relation between the clearing price of the security and the clearing price of one or several indices. A mechanism similar to ours, but limited to only one index, was implemented on the Tel Aviv Stock Exchange. We argue that it is in some cases crucial to make the execution of an order contingent on several indices. Our mechanism consists of a particular implementation of a double-sided multi-unit combinatorial auction with substitutes (or DMCS auction), which we introduced in an earlier article. |
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Keywords: | Trading systems Limit orders Market microstructure |
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