Two Order Books Are Better than One? Trading at Settlement (TAS) in VIX Futures
32 Pages Posted: 16 May 2014 Last revised: 10 Jul 2014
Date Written: July 9, 2014
We examine the effects from the Trading At Settlement (TAS) introduction on VIX futures market quality. We find that the VIX futures market exhibits higher trading activity and better liquidity after the TAS introduction. VIX futures traders use the TAS limit order book to execute large transactions, and TAS helps limit order traders from being picked off by informed traders when the VIX futures price volatility is high. The TAS introduction has created a highly liquid, low-cost, trading venue. Although the TAS introduction fragments VIX futures trading into two order books, liquidity in the regular order book is not hurt.
Keywords: Trading At Settlement, VIX Futures, Market Quality, Liquidity
JEL Classification: G14, G15
Suggested Citation: Suggested Citation