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

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.