The Impact of Screen Trading on the Link between Stock Index and Stock Index Futures Prices: Evidence from UK Markets
27 Pages Posted: 19 Jun 2002
In this paper, we consider the impact of the introduction of LIFFE CONNECT on the lead-lag relationship between the FTSE100 index and its futures. In general, the results of this study suggest that the move to screen trading strengthens the simultaneity of price discovery in the cash and futures markets and lessens the existence of a lead-lag relationship. This evidence differs to that of the previous literature which has generally found a strengthening of the lead of the futures market to the cash market. The reason for this difference in results is most likely a reflection of the fact that the cash market was generally floor traded in the previous literature, while in this study the FTSE100 was screen traded.
Keywords: screen-trading, stock index futures, London International Financial Futures Exchange (LIFFE), FTSE100
JEL Classification: G32, F23, F30
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