Activity in futures

Does underlying market size relate to futures trading volume?

Alex Frino, Elvis Jarnecic*, Hui Zheng

*Corresponding author for this work

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This study investigates the determinants of trading volume in the futures markets and focuses on underlying market characteristics as an explanation for futures trading volume. Four major futures contracts traded on the Sydney Futures Exchange are investigated: the stock price index (SPI); the 90-day bank accepted bill (BAB); the 3-year bond; and the 10-year bond. An important outcome of this study is an identification of the fundamental drivers of trading volume in the futures markets, which have largely gone undocumented in prior research. We find evidence that futures trading volume is related to underlying market characteristics: the size of the Australian superannuation fund investments in equities (for the SPI), short term treasury notes (for the BAB), non-government bonds on issue (for the 3-year contract) and government bonds on issue (for the 10-year contract).

Original languageEnglish
Pages (from-to)313-325
Number of pages13
JournalReview of Quantitative Finance and Accounting
Volume34
Issue number3
DOIs
Publication statusPublished - Apr 2010

Keywords

  • Futures markets
  • Trading volume

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