PSA: 17:30 CET ≠ Begin of Closing Auction
I remember this from my childhood:
How long does a football (soccer) match last? No, not 90 min; until the umpire blows the whistle.
Analogously:
When does the closing auction start on Xetra? No, not at 17:30 CET; when the instrument goes into SecurityTradingStatus=210.
It is true that the closing auction normally starts at 17:30 CET but the documentation is clear in that this is the earliest start time of the closing auction and that only the instrument state update marks the official start of the closing auction.
Fig. 1 below shows a breakdown of when the closing auction actually starts for different categories of securities. We see that DAX, MDAX, and SDAX equities indeed always go into auction at 17:30 CET. The start of the closing auction is delayed, however, for most other instruments. Many go into auction 30 seconds later, most with a delay of one minute.
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The next question is: are there participants who rely on German punctuality and assume that every auction starts at 17:30 CET? The answer is: yes.
And, in fact, we see this in Fig. 2 below. Each panel shows the trading activity by second starting at 17:29 CET. The period from 17:29 to 17:30 CET can act as a baseline for continuous trading activity. The vertical orange line denotes the actual start of the closing auction. Only instruments/dates are included on which the closing auction did indeed start at 17:30 CET (give or take one second) are considered in the top panel. Similarly, the middle and bottom panels only includes data for when the closing auction began at 17:30:30 and 17:31 CET, respectively.
The telltale sign are trades triggered by market orders. They are rarely used during continuous trading but surprisingly common in the closing auction (more about this next week). So, an increase in market order usage indicates that the sender is not aware that the auction has not started yet.
In particular the market orders sent a few seconds after 17:30 CET are clearly sent based on a timer.
And the market orders are probably not the only unintended trades. It is likely that participants thought they would enter an aggressively priced order into the auction book but instead it traded aggressively immediately - or they were soon picked off by an IOC order from another participant who was aware of the actual status of the market.
File under: "Every assumption you make about market data is wrong."
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8 个月Stefan Schlamp - really interesting- and I would bet if you rolled the clock back say 15 years those market orders right before the close where a much higher percentage. It is not that long ago that even fairly sophisticated electronics trading businesses did not always consume the phase of market status tag.
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8 个月Mistaken orders into the continuous meant for the close auction can be easily avoided by using native close auction order types - however where these order types aren’t supported by the exchange or not utilised you would see this scenario occur more.