Journal ArticleDOI
Transaction Costs and Market Quality: Open Outcry Versus Electronic Trading
Yiuman Tse,Tatyana Zabotina +1 more
TLDR
In this article, the London International Financial Futures and Options Exchange (LIFFE) transferred trading in the Financial Times Stock Exchange (FTSE) 100 Index futures contracts from outcry to LIFFE CONNECT, its electronic trading system.Abstract:
On May 10, 1999, the London International Financial Futures and Options Exchange (LIFFE) transferred trading in the Financial Times Stock Exchange (FTSE) 100 Index futures contracts from outcry to LIFFE CONNECT, its electronic trading system. We find lower spreads in the electronic market after the transition. However, the open outcry mechanism has higher market quality (or smaller variance of the pricing error) on the basis of Hasbrouck's (1993) model. Furthermore, employing the Hasbrouck (1991) model, we show that trades in the open outcry market have higher information content. Inventory control considerations also affect the electronic market more than the open outcry market. The overall results suggest that electronic trading should complement, but not replace, open outcry in futures markets. © 2001 John Wiley & Sons, Inc. Jrl Fut Mark 21: 713–735, 2001read more
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Investment in capital markets
TL;DR: In this paper, the authors discuss the pros and cons of the financial capital investment in the capital markets, discussing the sophisticated investment concepts and techniques in the simple understandable readable general format language.
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Effectiveness of minimum-variance hedging
Carol Alexander,Andreza Barbosa +1 more
TL;DR: In this paper, the minimum-variance hedging may provide better out-of-sample hedging performance than a naiuve futures hedge, but only in markets without active trading of ETFs or advanced electronic communications networks.
Journal ArticleDOI
The impact of electronic trading on bid‐ask spreads: Evidence from futures markets in Hong Kong, London, and Sydney
TL;DR: In this paper, the authors show that the performance of electronic trading systems deteriorates during periods of information arrival, suggesting that electronic trading can facilitate higher levels of liquidity and lower transaction costs relative to floor traded markets.
Journal ArticleDOI
The contribution of a satellite market to price discovery: Evidence from the Singapore exchange
TL;DR: In this article, the authors investigated the contribution of the Singapore Exchange to price discovery and shed light on the reasons for its continued success and provided evidence from information revelation and price discovery of three competing but informationally linked markets of the Nikkei 225 index.
Journal ArticleDOI
On the winning virtuous strategies for ultra high frequency electronic trading in foreign currencies exchange markets
TL;DR: In this paper, the authors discuss the probability theory and the statistics theory application to accurately characterize the trends in the foreign currency exchange rates dynamics in the short and long time periods and formulate the Ledenyov law on the limiting frequency (the cut-off frequency) for the ultra high frequency electronic trading in the currency exchange markets.
References
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Journal ArticleDOI
A Theory of Intraday Patterns: Volume and Price Variability
Anat R. Admati,Paul Pfleiderer +1 more
TL;DR: In this paper, the authors developed a theory that concentrated trading patterns arise endogenously as a result of the strategic behavior of liquidity traders and informed traders and provided a partial explanation for some of the recent empitical findings concerning the patterns of volume and price variability in intraday transaction data.
Journal ArticleDOI
A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the ‘business cycle’☆
TL;DR: In this article, a general procedure for decomposition of non-stationary time series into a permanent and transitory component allowing both components to be stochastic is introduced. But the decomposition methodology depends only on past data and therefore is computable in real-time.
Journal ArticleDOI
Information Effects on the Bid‐Ask Spread
Thomas E. Copeland,Dan Galai +1 more
TL;DR: In this paper, it is shown that the bid-ask spread is a positive function of the price level and return variance, a negative function of measures of market activity, depth, and continuity, and negatively correlated with the degree of competition.
Journal ArticleDOI
Measuring the Information Content of Stock Trades
TL;DR: In this article, the interactions of security trades and quote revisions are modeled as a vector autoregressive system and the extent of the information asymmetry is measured as the ultimate price impact of the trade innovation.
Posted Content
Transmission of Volatility Between Stock Markets
Mervyn A. King,Sushil Wadhwani +1 more
TL;DR: In this paper, the authors investigated why almost all stock markets fell together despite widely differing economic circumstances and found that "contagion" between markets occurs as the result of attempts by rational agents to infer information from price changes in other markets.