Trading Protocols and Price Discovery: Implicit Transaction Costs in Indian Single Stock Futures

23 Pages Posted: 19 Aug 2019 Last revised: 7 Apr 2020

See all articles by Edward Curran

Edward Curran

Macquarie University - Faculty of Business and Economics

Jack Hunt

Independent

Vito Mollica

Macquarie Graduate School of Management; Capital Markets CRC Limited (CMCRC); Macquarie University, Macquarie Business School

Date Written: August 15, 2019

Abstract

We showhowtrading protocols impede the price discovery process in single stock futures as implicit trade costs outweigh explicit costs. Despite the trade volume dominance, trade and leverage cost efficiency, the futures market accounts for only 35% of the price discovery vis-à-vis the spot market. Specifically, futures market’s informational efficiency is adversely affected by market frictions in the formof market wide position limits, minimum contract values and margin requirements.

Keywords: Market wide position limits, minimum contract value, trading protocols, single stock futures

JEL Classification: G13, G14

Suggested Citation

Curran, Edward and Hunt, Jack and Mollica, Vito, Trading Protocols and Price Discovery: Implicit Transaction Costs in Indian Single Stock Futures (August 15, 2019). Available at SSRN: https://ssrn.com/abstract=3437845 or http://dx.doi.org/10.2139/ssrn.3437845

Edward Curran (Contact Author)

Macquarie University - Faculty of Business and Economics ( email )

Sydney, New South Wales 2109
Australia

Jack Hunt

Independent

Vito Mollica

Macquarie Graduate School of Management ( email )

Capital Markets CRC Limited (CMCRC) ( email )

Level 3, 55 Harrington Street
Sydney, 2000
Australia

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

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