Keeping It Together

Exchanges like the Swiss Stock Exchange bring together buyers and sellers and establish prices to match demand with available supply. We ensure that market participants are sufficiently informed about the prices of the assets being traded in the market and allow them to make informed commercial decisions.

A key reference price that is established on the Swiss Stock Exchange is the closing price for Swiss equities: it is the last price at which a stock is traded during a trading day. Our mechanism to determine this closing price for equities is the closing auction.

The importance of the closing price is based on the fact that it is used for many purposes across financial markets. For example, the closing price is used as key benchmark to determine if a portfolio has increased or decreased in value, and it provides the basis for various calculations for investment funds and derivative contracts.

Over the past five years and due to various drivers, the closing auction has become the most significant liquidity event in European equities, with over 25% of daily volumes being executed during the last 5-10 minutes of the trading day on the primary listing venue of for each respective security. Given the recent introduction of alternative closing mechanisms and the dependence on the closing price as a singular, end-of-day security benchmark, recent joint research conducted by the University of St Gallen and the Swiss Stock Exchange has explored the impact of potential fragmentation of closing auction liquidity.

Read the full article by Adam Matuszewski, Head of Equities at the Swiss Stock Exchange, to discover the findings on two particular aspects: the price dislocation and the price discovery in the closing auction, as well as the conclusions regarding price efficiency in the closing auction relevant both for academia and the financial industry. The article was first published in The Trade magazine