Order Imbalance in the FTSE Index Futures Market: Electronic Versus Open Outcry Trading

23 Pages Posted: 27 Apr 2009

See all articles by Zi Ning

Zi Ning

affiliation not provided to SSRN

Yiuman Tse

University of Texas at San Antonio - College of Business

Date Written: 2008-09

Abstract

This study examines trading activities before and after the transfer of the FTSE 100 index futures contract from open outcry to electronic trading. Daily order imbalance exhibits strong serial persistence in the electronic limit order market, but not in open-outcry trading. Both excess buying and selling reduce liquidity. In the electronic venue, prior market movements barely affect investors' buying or selling decisions. Excess buy orders do not generate any price impact, but sell orders do. Positive imbalances are more strongly autocorrelated than negative imbalances. No trading elements, such as order imbalance, volume, or open interest, are associated with volatility. Moreover, excess buying decreases volatility. Such evidence suggests that the development and growth of electronic trading has changed the dynamics of trading activities in many important ways.

Suggested Citation

Ning, Zi and Tse, Yiuman, Order Imbalance in the FTSE Index Futures Market: Electronic Versus Open Outcry Trading (2008-09). Journal of Business Finance & Accounting, Vol. 36, Issue 1-2, pp. 230-252, January/March 2009, Available at SSRN: https://ssrn.com/abstract=1378260 or http://dx.doi.org/10.1111/j.1468-5957.2008.02116.x

Zi Ning (Contact Author)

affiliation not provided to SSRN ( email )

Yiuman Tse

University of Texas at San Antonio - College of Business ( email )

Department of Finance
San Antonio, TX 78249
United States
210-458-5314 (Phone)

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