Message traffic restrictions and relative pricing efficiency: Evidence from index futures contracts and exchange-traded funds

Andrew Lepone, Jun Wen, Jin Young Yang

Research output: Contribution to journalArticleResearchpeer-review

Abstract

This study examines the impact of message traffic restrictions on the relative pricing efficiency of futures market. In particular, this paper investigates the return correlation between index futures contracts and Exchange-Traded Funds (ETFs) against the implementation of two message traffic regulatory restrictions, namely the Cost Recovery Scheme in Australia (2012) and the Integrated Fee Model in Canada (2012). Evidence indicates that the message traffic regulatory restrictions impose a positive impact on the relative pricing efficiency between futures and equity markets. Results also reveal that the lead-lag relationship between the ETF and futures markets does not change qualitatively after the regulatory transitions.

LanguageEnglish
Pages366-375
Number of pages10
JournalPacific Basin Finance Journal
Volume51
DOIs
Publication statusPublished - 1 Oct 2018

Fingerprint

Exchange traded funds
Pricing efficiency
Futures contracts
Futures markets
Canada
Lead-lag relationship
Equity markets
Fees
Integrated
Cost recovery

Keywords

  • Exchange-traded funds
  • Index arbitrage
  • Index futures contracts
  • Message traffic restrictions

Cite this

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abstract = "This study examines the impact of message traffic restrictions on the relative pricing efficiency of futures market. In particular, this paper investigates the return correlation between index futures contracts and Exchange-Traded Funds (ETFs) against the implementation of two message traffic regulatory restrictions, namely the Cost Recovery Scheme in Australia (2012) and the Integrated Fee Model in Canada (2012). Evidence indicates that the message traffic regulatory restrictions impose a positive impact on the relative pricing efficiency between futures and equity markets. Results also reveal that the lead-lag relationship between the ETF and futures markets does not change qualitatively after the regulatory transitions.",
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Message traffic restrictions and relative pricing efficiency : Evidence from index futures contracts and exchange-traded funds. / Lepone, Andrew; Wen, Jun; Yang, Jin Young.

In: Pacific Basin Finance Journal, Vol. 51, 01.10.2018, p. 366-375.

Research output: Contribution to journalArticleResearchpeer-review

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