The relationship between satellite and home market volumes

evidence from cross-listed Singapore futures contracts

Alex Frino, Frederick H de B Harris, Andrew Lepone*, Jin Boon Wong

*Corresponding author for this work

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

This paper examines the order flow diversion hypothesis using cross-listed Singapore Exchange (SGX) futures contracts to test if the existence of an off-shore market causes the order migration of futures volume from the domestic to foreign markets. Using structural equation systems estimation based on daily turnover, we observe that a 10% increase in the turnover of the SGX traded Nikkei 225 leads to an increase of 6.6% for the Nikkei 225 traded on the OSE. Further examination of the cross-listed Nifty and the MSCI-Taiwan Index futures provide similar evidence of a positive and significant relationship. We also observe that off-shore index futures have a positive and significant impact on domestic component stocks' turnover. Evidence in this study supports the rejection of the order-flow hypothesis, and suggests that a mutually beneficial relationship exists between cross-border exchanges.

Original languageEnglish
Pages (from-to)301-311
Number of pages11
JournalPacific-Basin finance journal
Volume24
DOIs
Publication statusPublished - Sep 2013
Externally publishedYes

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