Trader Survival: Evidence from the Energy Futures Markets

Journal of Futures Markets, 32 (2012), 809-836

39 Pages Posted: 13 Apr 2011 Last revised: 4 Nov 2014

See all articles by Naomi E. Boyd

Naomi E. Boyd

West Virginia University

Alexander Kurov

West Virginia University - College of Business & Economics

Date Written: June 2011

Abstract

We analyze the adaptation of traders and the determinants of trader survival during a period of changing market structures. Our unique sample of transactions level data covers the introduction of electronic trading in the NYMEX energy futures market. The results show that most floor traders adapted to the side-by-side electronic and open outcry trading, although trader attrition increased and the profitability of surviving traders declined dramatically. We also find that trading profits, trader experience and sophistication, and dual trading have a positive effect on the probability of trader survival. Scalpers are less likely to exit trading in pure open outcry trading, but are more likely to fail than traders who hold open positions longer in side-by-side trading. Finally, traders trading in multiple energy futures markets and those who use both the exchange floor and electronic trading appear to have a survival advantage in side-by-side trading.

Keywords: Survival, Financial Markets, Market Structure, Futures Markets, Microstructure

JEL Classification: C24, E44, G14, O33

Suggested Citation

Boyd, Naomi E. and Kurov, Alexander, Trader Survival: Evidence from the Energy Futures Markets (June 2011). Journal of Futures Markets, 32 (2012), 809-836. Available at SSRN: https://ssrn.com/abstract=1808115 or http://dx.doi.org/10.2139/ssrn.1808115

Naomi E. Boyd

West Virginia University ( email )

PO Box 6025
Morgantown, WV 26506
United States

Alexander Kurov (Contact Author)

West Virginia University - College of Business & Economics ( email )

P.O. Box 6025
Morgantown, WV 26506
United States

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