Do designated market makers improve liquidity in open-outcry futures markets?

2004 ◽  
Vol 24 (5) ◽  
pp. 479-502 ◽  
Author(s):  
Yiuman Tse ◽  
Tatyana Zabotina
Keyword(s):  
Futures Markets ◽  
Market Makers ◽  
Open Outcry

High Frequency Trading of Commodities

2018 ◽  
Author(s):  
Raymond P. H. Fishe
Keyword(s):  
High Frequency ◽  
Equity Markets ◽  
Conclusive Evidence ◽  
Commodity Markets ◽  
High Frequency Trading ◽  
Market Quality ◽  
Market Makers ◽  
Speed Advantage ◽  
Open Outcry ◽  
Derivative Markets

Electronic platforms and high frequency traders (HFTs) have changed the nature of trading. Like equity markets, commodity markets have experienced an influx of algorithmic traders and a decline in “pit” or open outcry trading. Regulatory efforts to understand the effects of HFTs and to offer prudent guidelines or new rules are in their infancy. An overall hesitancy exists because academic studies have produced diverse results on liquidity, volatility, and market quality. This survey focuses on high frequency trading research in commodity derivative markets, documenting basic results and extracting inferences when warranted. Evidence indicates that HFTs act as market makers and their speed advantage has lowered transaction costs, generally during normal markets. Although not entirely conclusive, evidence also suggests that HFTs may exacerbate volatility by withdrawing liquidity in times of market stress, such as during “flash” crashes.

Market Makers and Liquidity Premium in Electricity Futures Markets

2022 ◽  
Vol 43 (2) ◽  
Author(s):  
Juan Ignacio Peña ◽  
Rosa Rodríguez
Keyword(s):  
Futures Markets ◽  
Liquidity Premium ◽  
Market Makers

scholarly journals The Future of Price: Communicative Infrastructures and the Financialization of Indian Tea

2015 ◽  
Vol 31 (1) ◽  
pp. 4-29 ◽  
Author(s):  
Sarah Besky
Keyword(s):  
Futures Markets ◽  
Digital Technologies ◽  
Northeast India ◽  
Futures Contracts ◽  
Face To Face ◽  
Tea Industry ◽  
Open Outcry ◽  
The Government ◽  
Derivatives Markets ◽  
Indian Tea

For more than 150 years, most tea grown on plantations in northeast India has been sold in open-outcry auctions in Kolkata. In this essay, I describe how, in 2009, the Tea Board of India, the government regulator of the tea trade, began to convert auctioning from a face-to-face outcry process to a face-to-computer digital one. The Tea Board hoped that with the implementation of digital technologies, trade would soon revolve around the buying and selling of futures contracts, not individual lots of tea. Despite these efforts, the tea industry has thus far resisted all attempts at financialization. That so prominent a commodity as tea has yet to be financialized provides a unique opportunity to examine the how of financialization—the governmental and technical steps that precede futures and other kinds of derivatives markets. Futures markets rely on a standardized notion of price and of the material things being priced. The story of Indian tea’s resistance to financialization shows how such standardization requires not just a disentangling of commodities at the level of productive infrastructure (that is, the separation of individual trader and thing being traded) but also a reworking of the communicative infrastructure of trading. In this essay, I analyze this reworking by examining the effort to reform how tea is priced at auction. Specifically, I describe a transition in tea valuation from socially embedded price stories to standardized price scenarios.

Execution quality in open-outcry futures markets

2005 ◽  
Vol 25 (11) ◽  
pp. 1067-1092 ◽  
Author(s):  
Alexander Kurov
Keyword(s):  
Futures Markets ◽  
Open Outcry

Behavioral Aspects of Commodity Markets

2018 ◽  
Author(s):  
John R. Nofsinger
Keyword(s):  
Risk Taking ◽  
Loss Aversion ◽  
Futures Markets ◽  
Reference Points ◽  
The Public ◽  
Behavioral Biases ◽  
Market Makers ◽  
Market Participants ◽  
Momentum Investing ◽  
The Impact

Are behavioral biases prevalent in commodities and futures markets? Although retail equity investors display many psychological biases, investors who are more sophisticated exhibit fewer biases. The market makers, traders (locals), speculators, hedgers, and institutions of the commodities and futures markets tend to be professional participants, and thus less prone to behavioral biases. Nevertheless, the fast-paced action of these markets is an environment that fosters behavioral errors. This chapter reviews the literature on the pervasiveness of prospect theory behavior and other biases in these markets. Strong evidence indicates that market participants exhibit loss aversion, the impact of reference points, the disposition effect, and overconfidence. They also engage in positive feedback trading and momentum investing. Lastly, the chapter reviews risk-taking and behavioral biases by the type of market participant, particularly focusing on market makers, floor traders, clearing members, and the public.

Destabilizing momentum trading and counterbalancing contrarian strategy by large trader groups

2019 ◽  
Vol 19 (1) ◽  
pp. 83-106
Author(s):  
Jang Hyung Cho ◽  
Robert Daigler ◽  
YoungHa Ki ◽  
Janis Zaima
Keyword(s):  
Futures Markets ◽  
Trading Strategies ◽  
Institutional Trading ◽  
Momentum Strategy ◽  
Content Type ◽  
Contrarian Strategy ◽  
Market Makers ◽  
Contrarian Strategies ◽  
Momentum Trading ◽  
Individual Traders

Purpose The purpose of this paper is to assess trading strategies adopted by each large trader group and examine their effects on the volatility in the interest rate futures markets. Design/methodology/approach The Grinblatt et al.'s (1995) measure of momentum strategy is used to estimate the degree momentum and contrarian strategies. Then, regression analysis is used to determine the effects of trading strategies on volatility. Findings Up until 2005, the trades by non-clearing member firms in the futures market were separated from institutional traders providing us the opportunity to study trading strategies adopted by large distinct trading groups and its effects on volatility in the futures markets. It is found that individual traders use momentum strategy, whereas market makers and institutional traders use contrarian strategy. Momentum strategy adopted by individual traders increases volatility whereas contrarian strategy dampens volatility. Moreover, it is found that institutional traders engage more actively in contrarian trading when individual traders cause excessive volatility. The two distinct trading groups were separately tracked prior to 2005 giving us a unique window to determine the effect of the traders that conduct momentum trading as opposed to the ones that are contrarian traders. After the reclassification, the institutional trading group exhibited weaker contrarian strategy which can be attributed to the inclusion of non-clearing firm traders. Originality/value This study documents the first empirical evidence that shows off-exchange futures trader group is not composed of only pure noise makers, but there are short-term forecasters in its group. The authors also show a unique finding that noises caused by off-exchange group is from momentum strategy that they use, whereas contrarian strategy is used by institutional trader lower volatility.

Price Dynamics in the Regular and E-Mini Futures Markets

2004 ◽  
Vol 39 (2) ◽  
pp. 365-384 ◽  
Author(s):  
Alexander Kurov ◽  
Dennis J. Lasser
Keyword(s):  
Futures Markets ◽  
Price Discovery ◽  
Futures Contracts ◽  
Price Dynamics ◽  
Price Leadership ◽  
Index Futures ◽  
Empirical Results ◽  
Informed Traders ◽  
Open Outcry ◽  
Informational Advantage

AbstractThis paper examines the price dynamics in the S&P 500 and Nasdaq-100 index futures contracts. By utilizing transactions data with attached trader type identification codes, we are able to analyze price dynamics for trades initiated by exchange locals and off-exchange customers. The empirical results show that price discovery appears to be initiated in the E-mini index futures contracts and that trades initiated by exchange locals seem to be more informative than those initiated by off-exchange traders. Furthermore, results show that exchange locals appear to make informed trades on the E-mini contracts around large trades that occur on the open outcry floor. We maintain that the exchange locals' ability to observe pit dynamics may contribute toward explaining the price leadership of the Emini contracts. Overall, the results are consistent with the notion that exchange locals are informed traders who derive their informational advantage from the proximity to order flow.

Electronic versus open outcry trading in agricultural commodities futures markets

2011 ◽  
Vol 20 (1) ◽  
pp. 28-36 ◽  
Author(s):  
Valeria Martinez ◽  
Paramita Gupta ◽  
Yiuman Tse ◽  
Jullavut Kittiakarasakun
Keyword(s):  
Futures Markets ◽  
Agricultural Commodities ◽  
Open Outcry
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