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
Number of pages16
JournalThe Journal of Futures Markets
Early online date5 Aug 2021
DOIs
Publication statusE-pub ahead of print - 5 Aug 2021

Keywords

  • derivatives
  • efficiency
  • leverage
  • market manipulation

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