Screen trading and the link between cash and futures prices

Evidence from UK index markets

Alex Frino*, Michael D. McKenzie

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingConference proceeding contribution

Abstract

In this paper, we consider the impact of the introduction of LIFFE CONNECT on the lead-lag relationship between the FTSE100 index and its futures contract. In general, the results of this study suggest that the move to screen trading strengthens the simultaneity of price discovery in the cash and futures markets. This evidence differs to that of the previous literature which has generally found a strengthening of the lead of the futures market to the cash market. This difference is most likely attributable to the fact that the FTSE100 is screen traded in contrast to the previous literature in which the cash market was generally floor traded.

Original languageEnglish
Title of host publicationProceedings of the IASTED International Conference on Financial Engineering and Applications
EditorsM.H. Hanza
Pages103-112
Number of pages10
Publication statusPublished - 2003
EventProceedings of the IASTED International Conference on Financial Engineering and Applications - Banff, Alta., Canada
Duration: 2 Jul 20033 Jul 2003

Other

OtherProceedings of the IASTED International Conference on Financial Engineering and Applications
CountryCanada
CityBanff, Alta.
Period2/07/033/07/03

Keywords

  • FTSE100
  • London International Financial Futures Exchange (LIFFE)
  • Screen-trading
  • Stock index futures

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    Frino, A., & McKenzie, M. D. (2003). Screen trading and the link between cash and futures prices: Evidence from UK index markets. In M. H. Hanza (Ed.), Proceedings of the IASTED International Conference on Financial Engineering and Applications (pp. 103-112)