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

See all articles by Bujar Huskaj

Bujar Huskaj

Lund University

Lars L. Norden

Stockholm University - Stockholm Business School

Date Written: July 9, 2014

Abstract

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

Huskaj, Bujar and Nordén, Lars L., Two Order Books Are Better than One? Trading at Settlement (TAS) in VIX Futures (July 9, 2014). Available at SSRN: https://ssrn.com/abstract=2437114 or http://dx.doi.org/10.2139/ssrn.2437114

Bujar Huskaj

Lund University ( email )

SE-220 07 Lund
Sweden
+46 (0)46 222 95 49 (Phone)

Lars L. Nordén (Contact Author)

Stockholm University - Stockholm Business School ( email )

Sweden

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