LSE gives in to calls to reform closing auction

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The Independent Online

The London Stock Exchange has bowed to pressure to reform its end-of-day auction, blamed for a string of wild closing prices since its introduction in May.

The London Stock Exchange has bowed to pressure to reform its end-of-day auction, blamed for a string of wild closing prices since its introduction in May.

It was forced to act after tracker fund managers reacted with fury at having to pay 50 per cent more than the prevailing price for Dimension Data in a closing auction last month.

The South African software firm was due to enter the FTSE 100 after close of business on 15 September. That prompted a flurry of "buy" orders from tracker funds having to pay the closing price - whatever it turned out to be. A lack of sellers meant the auction was settled at £10, meaning Didata closed up 331p on the day. It came straight back down again in the next session.

It is understood the LSE will extend the auction beyond the current five minutes, giving traders more time to react to imbalances of "buy" and "sell" orders.

The LSE is consulting brokers and fund managers to decide how much more time is needed to improve the efficiency of the auction. It is understood that the changes will be introduced next month.

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