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Author: Thomas Henker
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Half point quotes and consequently half-point spreads are virtually non-existent in FTSE-100 futures trading. This is surprising since in 1994 Christie and Schultz published a series of papers documenting tacit collusion among NASDAQ market makers. Subsequent to the publication of their article the peculiarity ceased to exist for NASDAQ stocks but apparently not in other asset markets. The FTSE-100 futures contract is traded on the London International Financial Futures Exchange (LIFFE) throughout the day in open outcry pit trading and in after hours trading through an electronic market clearing system called Automated Pit Trading (APT). Pit trading is the prototype of a competitive market that is designed to ensure minimal bid-ask spreads.In a second part this paper estimates the total economic costs associated with the operation of the FTSE-100 futures trading pit. These costs arise from the existence of the bid-ask spread and are borne by all market participants who have a real demand for the futures contract and initiate trades. The spread costs are in addition to common transaction costs and fees paid directly to brokers and traders. The spreads in APT trading are found to be on average 50% higher than during pit trading, which may help explain the APT low trading volume relative to the volume transacted during pit trading. A spread decomposition shows that 80 percent of the spread can be attributed to time invariant spread components while only the remaining 20% are transient components related to price risk over the expected holding period of the scalper.
Author: Thomas Henker
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Half point quotes and consequently half-point spreads are virtually non-existent in FTSE-100 futures trading. This is surprising since in 1994 Christie and Schultz published a series of papers documenting tacit collusion among NASDAQ market makers. Subsequent to the publication of their article the peculiarity ceased to exist for NASDAQ stocks but apparently not in other asset markets. The FTSE-100 futures contract is traded on the London International Financial Futures Exchange (LIFFE) throughout the day in open outcry pit trading and in after hours trading through an electronic market clearing system called Automated Pit Trading (APT). Pit trading is the prototype of a competitive market that is designed to ensure minimal bid-ask spreads.In a second part this paper estimates the total economic costs associated with the operation of the FTSE-100 futures trading pit. These costs arise from the existence of the bid-ask spread and are borne by all market participants who have a real demand for the futures contract and initiate trades. The spread costs are in addition to common transaction costs and fees paid directly to brokers and traders. The spreads in APT trading are found to be on average 50% higher than during pit trading, which may help explain the APT low trading volume relative to the volume transacted during pit trading. A spread decomposition shows that 80 percent of the spread can be attributed to time invariant spread components while only the remaining 20% are transient components related to price risk over the expected holding period of the scalper.
Author: Owain Ap Gwilym
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
The microstructure of stock markets and futures markets has attracted considerable recent attention, but the evidence relating to options markets is sparse, especially for the U.K. This article addresses this void in the literature by presenting evidence on the intraday behavior of bid-ask spreads, returns, volatility, and volume. Both clear differences and similarities are found with the previous results for other markets. Spreads are found to be wide near the market open and narrow near the close. Although this contrasts with some previous evidence in U.S. stock and futures markets of a U-shaped pattern in intraday spreads, it is consistent with other recent research, and the differences may be explained by differing market structures. No clear pattern emerges in options returns, but there is a U-shape across the day in returns volatility and in volume. The results help to differentiate between the competing theories of the intraday behavior of these key variables.
Author: Charles M.S. Sutcliffe
Publisher: Routledge
ISBN: 1351148540
Category : Business & Economics
Languages : en
Pages : 844
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Book Description
The global value of trading in index futures is about $20 trillion per year and rising and for many countries the value traded is similar to that traded on their stock markets. This book describes how index futures markets work and clearly summarises the substantial body of international empirical evidence relating to these markets. Using the concepts and tools of finance, the book also provides a comprehensive description of the economic forces that underlie trading in index futures. Stock Index Futures 3/e contains many teaching and learning aids including numerous examples, a glossary, essay questions, comprehensive references, and a detailed subject index. Written primarily for advanced undergraduate and postgraduate students, this text will also be useful to researchers and market participants who want to gain a better understanding of these markets.
Author: Charles M.S. Sutcliffe
Publisher: Routledge
ISBN: 1351148559
Category : Business & Economics
Languages : en
Pages : 534
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Book Description
The global value of trading in index futures is about $20 trillion per year and rising and for many countries the value traded is similar to that traded on their stock markets. This book describes how index futures markets work and clearly summarises the substantial body of international empirical evidence relating to these markets. Using the concepts and tools of finance, the book also provides a comprehensive description of the economic forces that underlie trading in index futures. Stock Index Futures 3/e contains many teaching and learning aids including numerous examples, a glossary, essay questions, comprehensive references, and a detailed subject index. Written primarily for advanced undergraduate and postgraduate students, this text will also be useful to researchers and market participants who want to gain a better understanding of these markets.
Author: Christopher L. Gilbert
Publisher:
ISBN:
Category :
Languages : en
Pages : 35
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Book Description
We consider the impact of the May 1999 move by the London financial futures exchange LIFFE in relation to trading in the FTSE 100 index futures contract. The move was accompanied by a narrowing of the effective spread. Detailed examination of the tick data indicates that the determinants of the spread were quite different under the two regimes. These differences mainly reflect the fact that computerization introduces a limit order facility. Despite these changes, the narrowing of the spread appears to be principally due to a decline in tick-level volatility rather than to the way that this or other variables affect the spread. We also look at market depth and suggest that this has declined in the automated regime.
Author: Peter Simmons
Publisher:
ISBN:
Category : Finance
Languages : en
Pages :
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Book Description
Author: Abhay Abhyankar
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper uses a data set consisting of a complete history of all transactions and quotes to examine intraday patterns in trading volume, volatility and the quoted bid-ask spread in the market for FTSE-100 index futures. We also document a number of regularities in the pattern of daily returns and volatility of the cash index. Finally, we document intraday patterns in the basis, i.e. the contemporaneous difference between the futures price and the underlying cash index level. In general, we find returns vary somewhat over the day, reflecting in particular the influence of the US market openings in early afternoon London-time. We find that, while both volume and volatility exhibit a U-shaped pattern over the day, movements in the spread tend if anything to follow the opposite pattern. As far as consistency with the best-known microstructure models is concerned, our results are more supportive of the Brock and Kleidon (1992) market closures model than the Admati and Pfleiderer (1988) noise- trading model.
Author: Keith Redhead
Publisher:
ISBN:
Category : Business & Economics
Languages : en
Pages : 404
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Book Description
A complete, highly accessible introduction to futures, forwards, options and swaps. Covers stock index futures, and short- and long-term interest rate futures. Discusses advanced strategies, including currency forwards and futures, options, arbitrage, Black-Scholes and Binomial option pricing models. Discusses swaps. Presents numerous examples and worked "activities" to illustrate techniques and facilitate self-assessment. Undergraduate and postgraduate introductory courses in financial derivatives, financial markets, institutions and investments.
Author: Dominic Connolly
Publisher: Harriman House Limited
ISBN: 0857190873
Category : Business & Economics
Languages : en
Pages : 370
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Book Description
This is the only comprehensive UK-published guide to short-term trading, combining detailed reference information with the author's advice on strategy and tactics. Every serious trader in the UK needs this book - not a nice-to-have, but a must-have! The 10 key things you will learn: - Detailed description of the different trading platforms (SEAQ, SETS, SETSmm, SEATS Plus) on the London Stock Exchange. - How to deal inside the spread in market making stocks and get the best price. - How auctions work on the London Stock Exchange platforms. - The importance of direct market access for active traders. - The secrets of programme trading, index arbitrage and block deals. - How the cash, futures, lending and derivatives markets interact. - The secrets and risks of short selling. - Which directors' deals to follow and which are irrelevant. - How to make money from takeover situations. - Secret strategies from an established and successful trader.
Author: J. Board
Publisher: Springer
ISBN: 1403907072
Category : Business & Economics
Languages : en
Pages : 320
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Book Description
This is the first major treatment of the effects of increased transparency on financial markets: an important and highly controversial issue for both traders and regulators. Focussing on three main themes - market transparency, the consolidation-fragmentation of trading systems, and the scope of regulation (i.e. which markets, and which traders within those markets, should be subject to regulation), the book highlights the importance of these issues to all markets throughout the world. The book draws on research from eight UK based investment exchanges, Deutsche Borse in Frankfurt and documentary evidence from the US markets and their regulators enabling the identification and documentation of the current situation and consideration of what fresh regulatory approaches are required for this new and fast evolving situation.
