Dynamics of Interest Rate Futures: A Comprehensive Study from The Sydney Futures Exchange

20 Pages Posted: 11 Mar 2020

See all articles by Dionigi Gerace

Dionigi Gerace

The University of Sydney

Alex Frino

affiliation not provided to SSRN

Date Written: December 9, 2019

Abstract

This paper examines the dynamics of quoted bid-ask spreads, price volatility and percentage trading volume for the most liquid interest rate futures trading on the Sydney Futures Exchange. Using data for both the overnight and intraday markets of the Sydney Futures Exchange, patterns contrast the existing theory and prior research. During the Intra-night trading session, volume and volatility patterns show low trading activities between 5:30 and 9:30; while spreads show high asymmetric information during this interval. During the Intra-day trading session, both volume and volatility exhibits a significant increase at the opening and around 2.30pm, followed a significant decrease towards the end of the day session; Spreads are low at the opening and tendentially increase throughout the day up until the close of the day. We find that percentage Volume traded is higher during the day session; although spread significantly increases towards the end of the day session, it is tighter than the overnight spread. A number of tests are carried out documenting that these patterns are consistent with the effects of contagion from overseas markets, US versus Australia daylight savings, and major macro-economics information releases.

Keywords: Microstructure; Sydney Futures Exchange; Timezones; Information Announcements

JEL Classification: G10, G14, G15

Suggested Citation

Gerace, Dionigi and Frino, Alex, Dynamics of Interest Rate Futures: A Comprehensive Study from The Sydney Futures Exchange (December 9, 2019). Available at SSRN: https://ssrn.com/abstract=3540633 or http://dx.doi.org/10.2139/ssrn.3540633

Dionigi Gerace (Contact Author)

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

Alex Frino

affiliation not provided to SSRN

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