Multi-market trading in the Eurodollar futures market

Multi-market trading in the Eurodollar futures market On March 18, 2004, the London International Financial Futures and Options Exchange 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 discovery 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Multi-market trading in the Eurodollar futures market

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2006 by Springer Science + Business Media, Inc.
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-006-7436-0
Publisher site
See Article on Publisher Site

Abstract

On March 18, 2004, the London International Financial Futures and Options Exchange 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 discovery 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.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Jan 1, 2006

References

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