Rev Quant Finan Acc (2006) 26: 321–341
Multi-market trading in the Eurodollar futures market
Yiuman Tse · Paramita Bandyopadhyay
Springer Science + Business Media, Inc. 2006
Abstract On March 18, 2004, the London International Financial Futures and Options Ex-
change launched trading in Eurodollar futures contracts in an attempt to compete with a U.S.
rival, the Chicago Mercantile Exchange. The Chicago Mercantile Exchange responded to the
challenge by introducing several policy changes that aided the transfer of its trading volume
in Eurodollar futures from open outcry to the electronic trading platform, Globex, thereby
retaining its market share. We compare trading volume, effective spread, and price discov-
ery in Eurodollar futures at the Chicago Mercantile Exchange before and after the London
International Financial Futures and Options Exchange began trading the same contract. We
ﬁnd a general increase in trading volume on Globex beginning October 2003, way before the
London International Financial Futures and Options Exchange launched its contract. Globex
provides greater price discovery than open outcry during the entire time period under study.
Our research thus supports the global trend of conversion of traditional open outcry systems
into electronic exchanges.
Keywords Eurodollar futures
Recent years have witnessed a surge in cross-listed derivatives contracts at major global fu-
tures exchanges. The London International Financial Futures and Options Exchange (LIFFE)
introduced Eurodollar futures contracts on March 18, 2004, in an attempt to compete with its
U.S. rival, the Chicago Mercantile Exchange (CME). The CME responded to this challenge
Y. Tse (
College of Business, 501 West Durango Blvd.,
University of Texas at San Antonio, San Antonio, Texas 78207, U.S.A.
California State University, Long Beach