Reversing the lead, or a series of unfortunate events? NYMEX, ICE, and Amaranth
2009; Wiley; Volume: 29; Issue: 12 Linguagem: Inglês
10.1002/fut.20419
ISSN1096-9934
AutoresPaul Kofman, David Michayluk, James T. Moser,
Tópico(s)Complex Systems and Time Series Analysis
ResumoAbstract 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
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