Price formation and liquidity surrounding large trades in interest rate and equity index futures

Angelo Aspris, James Richard Cummings, Alex Frino

Research output: Contribution to journalArticle

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 languageEnglish
JournalReview of futures markets
Volume17
Issue number4
Publication statusPublished - 2009
Externally publishedYes

Keywords

  • Financial futures
  • Block trades
  • Price impact
  • Limit order book
  • Market resiliency

Fingerprint Dive into the research topics of 'Price formation and liquidity surrounding large trades in interest rate and equity index futures'. Together they form a unique fingerprint.

Cite this