Price Discovery in the Pits: The Role of Market Makers on the CBOT and the Sydney Futures Exchange

Journal of Futures Markets - Tập 24 Số 8 - Trang 785-804 - 2004
Alex Frino1, Frederick H. deB. Harris2, Thomas H. McInish3, Michael J. Tomas4
1Department of Finance, University of Sydney, Australia, New South Wales, 2006
2Babcock School, Wake Forest University, Winston‐Salem, North Carolina
3Institute for the Study of Security Markets, University of Memphis, Tennessee
4School of Business, University of Vermont, Burlington, Vermont

Tóm tắt

AbstractThis paper uses the methods of error correction and common factor analysis to estimate the contribution of locals (market makers who may participate directly by trading for their own account) and non‐local traders to price discovery on the floor of the Chicago Board of Trade (CBOT) and the Sydney Futures Exchange (SFE) during a period when open outcry trading was used on both exchanges. We examine these two execution channels for the CBOT's U.S. Treasury bond contract and the SFE's three‐year bonds, ten‐year bonds, ninety‐day bankers' accepted bills, and stock index contracts. For each of the futures contracts, the trade price series of local and non‐local traders are cointegrated. VAR analysis reveals lag structures eight to fifteen trades long in the dynamic adjustment of equilibrium prices in these markets, but time spans of only one to three seconds within synchronous trades. We find evidence of multilateral price discovery by the two execution channels for each of the five contracts. Locals account for 44 to 73% of the price discovery in the four SFE contracts and for 58% of the price discovery in the CBOT's T‐bond contract. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:785–804, 2004

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Thông tin xuất bản

Journal of Futures Markets

Tập 24 Số 8

785-804

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