Benchmarks in the Spotlight: The Impact on Exchange Traded Markets

39 Pages Posted: 20 Apr 2020

See all articles by Angelo Aspris

Angelo Aspris

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

Sean Foley

Macquarie University

Peter O'Neill

Financial Conduct Authority

Date Written: March 26, 2020

Abstract

The Fix for precious metals is a global pricing benchmark that provides pricing and liquidity provision for market participants. We exploit the gradual change in the century old auction process to quantify the efficiencies related to more transparent pricing for several precious metals. Our focus is on the market impact of this change on exchange listed products. We find that reforms to the Fix structure have reduced quoted and effective bid-ask spreads for exchange traded futures contracts and improved overall market depth. The results imply a positive spillover effect stemming from more timely and accurate pricing information. The conditions under which we observe the benefits from transparency are related to product liquidity and the degree of market segmentation.

Keywords: Transparency, Fix, benchmarks, precious metals, gold, silver, futures

JEL Classification: G13, G14

Suggested Citation

Aspris, Angelo and Foley, Sean and O'Neill, Peter, Benchmarks in the Spotlight: The Impact on Exchange Traded Markets (March 26, 2020). Available at SSRN: https://ssrn.com/abstract=3562073 or http://dx.doi.org/10.2139/ssrn.3562073

Angelo Aspris

University of Sydney - Discipline of Finance ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

Financial Research Network (FIRN)

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

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

Sean Foley (Contact Author)

Macquarie University ( email )

North Ryde
Sydney, New South Wales 2109
Australia
0417702600 (Phone)

Peter O'Neill

Financial Conduct Authority ( email )

25 The North Colonnade
Canary Wharf
London, E14 5HS
United Kingdom

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