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

See all articles by Alex Frino

Alex Frino

The University of Sydney - Discipline of Finance; Financial Research Network (FIRN)

Michael D. McKenzie

The University of Sydney - Discipline of Finance; University of Cambridge - Cambridge Endowment for Research in Finance (CERF); Financial Research Network (FIRN)

Abstract

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

Suggested Citation

Frino, Alex and McKenzie, Michael David, The Impact of Screen Trading on the Link between Stock Index and Stock Index Futures Prices: Evidence from UK Markets. EFMA 2002 London Meetings. Available at SSRN: https://ssrn.com/abstract=314398 or http://dx.doi.org/10.2139/ssrn.314398

Alex Frino (Contact Author)

The University of Sydney - Discipline of Finance ( email )

Futures Research Centre
P.O. Box H58
Sydney NSW
Australia
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+61 2 9299 1830 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
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Queensland
Australia

HOME PAGE: http://www.firn.org.au

Michael David McKenzie

The University of Sydney - Discipline of Finance ( email )

Level 2 9 Castlereagh Street
Sydney, NSW 2000
Australia
+61 2 9114 0578 (Phone)
+61 2 9351 6461 (Fax)

University of Cambridge - Cambridge Endowment for Research in Finance (CERF) ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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