Execution Costs and Their Intraday Variation in Futures Markets

Posted: 1 Feb 2001

See all articles by Michael F. Ferguson

Michael F. Ferguson

University of Cincinnati - Department of Finance - Real Estate

Steven C. Mann

Texas Christian University - M.J. Neeley School of Business

Abstract

We consider trading costs in the transparent, competitive open outcry markets of the Chicago Mercantile Exchange (CME) in which market makers have no affirmative obligation to trade. We document that while CME spreads are similar in magnitude to those in other markets, realized spreads are often negative. A plausible explanation is that CME market makers are able to employ more complex trading strategies than their equity market counterparts because they are not bound by affirmative obligation. The evidence suggests that market transparency and market maker obligations are important determinants of intraday variation in trading costs.

Suggested Citation

Ferguson, Michael F. and Mann, Steven Carl, Execution Costs and Their Intraday Variation in Futures Markets. Journal of Business, Vol. 74, No. 1, January 2001. Available at SSRN: https://ssrn.com/abstract=247772

Michael F. Ferguson

University of Cincinnati - Department of Finance - Real Estate ( email )

College of Business Administration
Cincinnati, OH 45221
United States
513-556-7080 (Phone)

Steven Carl Mann (Contact Author)

Texas Christian University - M.J. Neeley School of Business ( email )

Campus Box 298530
Fort Worth, TX 76129
United States
817-257-7569 (Phone)
817-257-7227 (Fax)

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