Three Essays on the Impact of Electronic Trading in Futures Markets PDF Download
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Author: Luke Bortoli
Publisher:
ISBN:
Category : Electronic trading of securities
Languages : en
Pages : 476
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Author: Luke Bortoli
Publisher:
ISBN:
Category : Electronic trading of securities
Languages : en
Pages : 476
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Author: Amelia M. Hill
Publisher:
ISBN:
Category : Commodity exchanges
Languages : en
Pages : 410
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Author: Sandip Dutta
Publisher:
ISBN:
Category :
Languages : en
Pages : 125
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Previous studies (on NASDAQ and the Chicago Mercantile Exchange) have documented that electronic trades make a dominant contribution to the price discovery process, as compared to floor trades. In this dissertation, I extend the body of literature on the microstructure of electronic trading in financial markets, with particular emphasis on the E-mini futures markets. In the three essays that are documented here, I present a microscopic examination of price dynamics and futures trading in the E-mini futures markets at the Chicago Mercantile Exchange.
Author: Van Thuan Nguyen
Publisher:
ISBN: 9781109846362
Category :
Languages : en
Pages : 153
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Book Description
The second essay examines competition among exchanges for order flow in ETFs. We find that ECNs dominate the market for ETFs. Besides providing superior prices to investors, ECNs also offer non-price services such as speedy execution and anonymity. Given the superior execution services on ECNs and the low adverse selection costs in ETF markets, liquidity traders also trade on ECNs. The results suggest that ECNs satisfy both liquidity and informed traders in the market for ETFs and this explains why they gain substantial order flow. We also find that quote-based competition is prevalent in the market for ETFs. Overall, our study supports the view that multimarket trading is a desirable development that helps cater to investors' diverse needs.
Author: Luyang Fu
Publisher:
ISBN:
Category :
Languages : en
Pages : 184
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Author: Abhay H. Abhyankar
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Author: Alexandre Aidov
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Author: Zi Ning
Publisher:
ISBN:
Category : Futures
Languages : en
Pages : 212
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Author: Joseph Peter Janzen
Publisher:
ISBN: 9781303442872
Category :
Languages : en
Pages :
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Recent booms and busts in commodity prices have placed renewed scrutiny on commodity futures markets as a mechanism for price discovery, the process of incorporating new information about the relative scarcity of the commodity into prices. Such concerns are not new; there has been some distrust of futures market price discovery since the inception of these markets. As these markets evolve, new market participants and institutions may influence price discovery. Using the Intercontinental Exchange (ICE) cotton futures market as a laboratory, I consider three such forces potentially responsible for poor price discovery during the 2007-2011 period of volatile cotton prices. These are financial speculation, electronic trading, and funding constraints on commercial hedgers. In Chapter 1, I study whether the increased presence of financial firms, particularly commodity index traders, drives cotton futures prices away from the levels implied by supply and demand under rational expectations. I estimate a structural vector autoregression model of the cotton futures market. My model develops a new method to point identify shocks to precautionary demand for cotton separately from shocks to current supply and demand and separately identifies the effects of two types of speculation: precautionary demand for the commodity and financial speculation. I show empirically that most cotton price variation stems from contemporaneous unanticipated shocks to current cotton supply and demand. However, the 2008 price spike came from an increase in precautionary demand due to projections of lower future production. I find no evidence in support of claims that financial speculation causes commodity booms and busts.Chapter 2 considers the introduction of electronic trading to the cotton futures market across three periods of floor trade, parallel floor and electronic trade, and electronic-only trade. I statistically decompose intraday variation in cotton prices into a component related to information about market fundamentals and a ''pricing error'' caused by frictions in the trading mechanism. Better market quality or price discovery is characterized by lower variance of the pricing error. Unlike previous studies of floor and electronic trading, I consider more than average measures of market quality. I calculate statistics for market quality for each trading day, and study their trend, variance, persistence, and relationship to other variables related to price discovery. I find that market quality improved, but became more variable under electronic trading. This relationship between electronic trading and market quality is robust to controls for changes over time in the number of trades, trading volume, and price volatility.My final chapter considers the role of funding constraints in exacerbating futures price spikes. I review the experience of commercial hedgers during the 2008 cotton futures price spike. In this period, commercial hedgers without access to credit were forced to close futures positions in an illiquid market. Losses incurred on these trades led some firms to exit the cotton merchandising business. I use facts from the cotton case to develop a dynamic model of futures market equilibrium in the short-run for cases where funding constraints for some hedging firms bind and do not bind. Analytical results show that observed futures price volatility can be explained by the relation between funding liquidity of trading firms and market liquidity. This relationship alters the trading behavior of hedgers and results in diminished price discovery.
Author:
Publisher:
ISBN:
Category : Dissertations, Academic
Languages : en
Pages : 732
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