Abstract
This paper examines the effects of the direction of trade initiation and trade size on the resiliency of financial futures markets by analysing quote prices, bid-ask spreads and depths. The price and liquidity reactions reveal the unexpected information content of large trades, together with the motivation for exchanging a futures contract. In the market adjustment process, the size of quotes posted by liquidity providers are shown to play a more important role in futures markets than in previous research for equity markets. The liquidity cost of a large futures trade is mainly a pecuniary externality borne by other traders by impairing their continued ability to trade.
| Original language | English |
|---|---|
| Journal | Review of futures markets |
| Volume | 17 |
| Issue number | 4 |
| Publication status | Published - 2009 |
| Externally published | Yes |
Keywords
- Financial futures
- Block trades
- Price impact
- Limit order book
- Market resiliency