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Electronic Trading (electronic + trading)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	100%

Selected Abstracts

DYNAMIC ORDER SUBMISSION AND HERDING BEHAVIOR IN ELECTRONIC TRADING

THE JOURNAL OF FINANCIAL RESEARCH, Issue 1 2010
Wing Lon Ng
Abstract I analyze the dynamic trading behavior of market participants by developing a bivariate modeling framework for describing the arrival process of buy and sell orders in a limit order book. The model contains an extended autoregressive conditional duration model with a flexible generalized Beta distribution to explain the duration process, combined with a dynamic logit model to capture the traders' order submission strategy. I find that the state of the order book as well as the speed of the order arrival have a significant influence on the order placement, inducing temporal asymmetric market movements. [source]

Financial Market Design and the Equity Premium: Electronic versus Floor Trading

THE JOURNAL OF FINANCE, Issue 6 2005
PANKAJ K. JAIN
ABSTRACT We assemble the announcement and actual introduction dates of electronic trading by the leading exchanges of 120 countries to examine the impact of automation, controlling for risk factors and economic conditions. Dividend growth models and international CAPM suggest a significant decline in the equity premium, especially in emerging markets. Consistent with this reduction in the equity premium in the long run, there is a positive short-term price reaction to the switch. Further analysis of trading turnover supports the notion that electronic trading enhances the liquidity and informativeness of stock markets, leading to a reduction in the cost of capital. [source]

Reversing the lead, or a series of unfortunate events?

THE JOURNAL OF FUTURES MARKETS, Issue 12 2009
Amaranth, NYMEX
A number of studies compare the efficiency and transparency of floor trading with automated/electronic trading systems in the competition for order flow. Although most of these studies find that electronic systems lead price discovery, a few studies highlight the weaknesses of electronic trading in highly volatile market conditions. A series of unusual events in 2006, sparking extreme volatility in natural gas futures trading, provide an ideal setting to revisit the resilience of trading system price leadership in the face of high volatility. We estimate time-varying Hasbrouck-style information shares to investigate the intertemporal and cross-sectional dynamics in price discovery. The results strongly suggest that the information share is time-dependent and contract-dependent. Floor trading dominates price discovery in the less liquid longer-maturity contracts, whereas electronic trading dominates price discovery in the most liquid spot-month contract. We find that the floor trading information share increases significantly with realized volatility. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:1130,1160, 2009 [source]

An analysis of the failed municipal bond and note futures contracts

THE JOURNAL OF FUTURES MARKETS, Issue 7 2008
Patrick J. CusatisArticle first published online: 2 MAY 200
This study analyzes the failure of the municipal bond and municipal note futures contracts. The municipal bond contract is shown to have been the most effective hedge in the municipal market over its tenure. Changes in volume in the municipal bond contract were closely related to changes in the volume in the U.S. Treasury bond futures contract, the spot,municipal-over-bonds (MOB) ratio, and visible supply. The failure of the municipal bond contract is mainly attributed to a decrease in trading volume in the U.S. Treasury futures market. This was impacted by the onset of electronic trading, which the municipal futures market was reluctant to embrace. The municipal note contract was a less effective hedge than U.S. Treasury note futures and ten-year London Interbank Offered Rate swaps. The failure of the municipal note futures contract is attributed to the existence of well-established alternative hedges, and segmentation in the municipal market. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:656,679, 2008 [source]

Intraday price-reversal patterns in the currency futures market: The impact of the introduction of GLOBEX and the euro

THE JOURNAL OF FUTURES MARKETS, Issue 11 2006
Joel Rentzler
This article assesses the intraday price-reversal patterns of seven major currency futures contracts traded on the Chicago Mercantile Exchange over 1988,2003 after 1-day returns and opening gaps. Significant intraday price-reversal patterns are observed in five of the seven currency futures contracts, following large price changes. Additional tests are conducted in three subperiods (1988,1992, 1993,1998, and 1999,2003) to examine the impact of the introduction of electronic trading on GLOBEX in 1992 (to assess how a near 24-hour trading session might impact the next-day opening and closing futures prices) and the introduction of the euro in 1999 (to assess its impact on price predictability in other futures markets). It is found that the introduction of the GLOBEX in 1992 significantly reduced pricing errors in currency futures in the second subperiod, making the currency futures markets fairly efficient. However, the introduction of the new currency, the euro, and the disappearance of several European currencies in 1999, resulted in significant price patterns (mostly reversals and some persistence) in most of the currency futures, indicating inefficiencies in the third subperiod. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:1089,1130, 2006 [source]

Information transmission in electronic versus open-outcry trading systems: An analysis of U.S. equity index futures markets

THE JOURNAL OF FUTURES MARKETS, Issue 7 2005
Aysegul Ates
In this article the intraday price discovery process between regular index futures (floor trading) and E-mini index futures (electronic trading) in the S&P 500 and Nasdaq 100 index futures markets is examined, using intraday data from the introduction of the E-mini index futures to 2001. Using both information shares (Hasbrouck, J., 1995) and common long-memory factor weights (Gonzalo, J., & Granger, C. W. J., 1995) techniques, we find that both E-mini index futures and regular index futures contribute to the price discovery process. However, since September 1998, the contribution made by E-mini index futures has been greater than that provided by regular index futures. Based on regression analysis, we have also found direct empirical evidence to support the hypothesis that the joint effects of operational efficiency and relative liquidity determine the greater contribution made towards price discovery by electronic trading relative to open-outcry trading over time. © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25: 679,715, 2005 [source]

How electronic trading affects bid-ask spreads and arbitrage efficiency between index futures and options

THE JOURNAL OF FUTURES MARKETS, Issue 4 2005
Kevin H. K. Cheng
This paper examines the impact of switching to electronic trading on the relative pricing efficiency of Hang Sang Index futures and options contracts traded on the Hong Kong exchange. The study is motivated by the recent shift in 2000 from the pit to an electronic trading platform. Electronic trading leads to lower bid-ask spreads and less price clustering than floor trading in both the options and futures markets. Mispricing between futures and options drops significantly after the change. Quicker correction of mispricing indicates a significant improvement in dynamic inter-market arbitrage efficiency with electronic trading. © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25:375,398, 2005 [source]

The impact of electronic trading on bid-ask spreads: Evidence from futures markets in Hong Kong, London, and Sydney

THE JOURNAL OF FUTURES MARKETS, Issue 7 2004
Michael J. Aitken
During 1999 and 2000, three major futures exchanges transferred trading in stock index futures from open outcry to electronic markets: the London International Financial Futures and Options Exchange (LIFFE); the Sydney Futures Exchange (SFE); and the Hong Kong Futures Exchange (HKFE). These changes provide unique natural experiments to compare relative bid-ask spreads of open outcry vs. electronically traded markets. This paper provides evidence of a decrease in bid-ask spreads following the introduction of electronic trading, after controlling for changes in price volatility and trading volume. This provides support for the proposition that electronic trading can facilitate higher levels of liquidity and lower transaction costs relative to floor traded markets. However, bid-ask spreads are more sensitive to price volatility in electronically traded markets, suggesting that the performance of electronic trading systems deteriorates during periods of information arrival. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:675,696, 2004 [source]