Journal ArticleDOI
Manipulation of Cash‐Settled Futures Contracts
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In this article, the authors show that it is always possible to design a delivery-settled futures contract that is less susceptible to cornering by a large long than any given cash settled contract.Abstract:
Replacement of delivery settlement of futures contracts with cash settlement is frequently proposed to reduce the frequency of market manipulation. This article shows that it is always possible to design a delivery-settled futures contract that is less susceptible to cornering by a large long than any given cash-settled contract. Such a contract is more susceptible to manipulation by large shorts, however. Therefore, cash settlement does not uniformly dominate delivery settlement as a means of reducing the frequency of market power manipulations in derivatives markets. The efficient choice of settlement mechanism depends on whether supply and demand conditions favor short or long manipulations. Copyright 2001 by University of Chicago Press.read more
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References
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Book
Storage and Commodity Markets
TL;DR: In this paper, the authors focus on the behavior of aggregate stockpiles and provide insights into such questions as how much a country should store out of its current supply of food considering the uncertainty in future harvests.
Journal ArticleDOI
Futures Manipulation with "Cash Settlement"
Praveen Kumar,Duane J. Seppi +1 more
TL;DR: In this paper, the authors investigate the susceptibility of futures markets to price manipulation in a two-period model with asymmetric information and "cash settlement" futures contracts and show that profits from manipulation fall to zero as the number of manipulators grows.
Book
Futures and Options
Franklin R. Edwards,Cindy W. Ma +1 more
TL;DR: In this article, the authors present an overview of the history of the stock market crash and the controversy over stock index futures, as well as the role of speculators in the market.
Journal ArticleDOI
Manipulation of the Commodity Futures Market Delivery Process
TL;DR: In this article, an analysis of the futures market delivery "end game" specifies necessary and sufficient conditions for long and short traders to manipulate futures prices at contract expiration, and the empirical and welfare implications of manipulation are derived as well.