Single stock futures and their impact on market quality: Be careful what you wish for

Edward Curran, Jack Hunt, Vito Mollica

Research output: Contribution to journalArticlepeer-review

Abstract

We explore the relationship between efficiency and fairness around a natural experiment resulting in the delisting of equity-linked single stock futures on the National Stock Exchange of India. We provide evidence that the presence of a derivative improves the liquidity of the underlying but decreases the degree of fairness - proxied by manipulation likelihood. Our study highlights that a leveraged derivative entices manipulation of the underlying and that typical inhibitors of manipulation, high execution costs, are conducive to successful market abuse.
Original languageEnglish
Pages (from-to)1677-1692
Number of pages16
JournalThe Journal of Futures Markets
Volume41
Issue number11
Early online date5 Aug 2021
DOIs
Publication statusPublished - Nov 2021

Keywords

  • derivatives
  • efficiency
  • leverage
  • market manipulation

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