Price Dynamics in the Regular and E-Mini Futures Markets

38 Pages Posted: 7 May 2003

See all articles by Alexander Kurov

Alexander Kurov

West Virginia University - College of Business & Economics

Dennis Lasser

State University of New York (SUNY) at Binghamton - School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: January 31, 2003

Abstract

This paper examines the price dynamics in the S&P 500 and Nasdaq-100 index futures contracts. By utilizing transactions data with attached trader type identification codes, we are able to analyze price dynamics for trades initiated by exchange locals and off-exchange customers. The empirical results show that price discovery appears to be initiated in the E-mini index futures contracts and that trades initiated by exchange locals seem to be more informative than those initiated by off-exchange traders. Furthermore, results show that exchange locals appear to make informed trades on the E-mini contracts around large trades that occur on the open outcry floor. We maintain that the exchange locals' ability to observe pit dynamics may contribute toward explaining the price leadership of the E-mini contracts. Overall, the results are consistent with the notion that exchange locals are informed traders who derive their informational advantage from the proximity to order flow.

Keywords: Futures, Electronic trading, Exchange locals, Price discovery

JEL Classification: G13

Suggested Citation

Kurov, Alexander and Lasser, Dennis, Price Dynamics in the Regular and E-Mini Futures Markets (January 31, 2003). Available at SSRN: https://ssrn.com/abstract=386965 or http://dx.doi.org/10.2139/ssrn.386965

Alexander Kurov

West Virginia University - College of Business & Economics ( email )

P.O. Box 6025
Morgantown, WV 26506
United States

Dennis Lasser (Contact Author)

State University of New York (SUNY) at Binghamton - School of Management ( email )

Vestal Parkway East
Binghamton, NY 13902-6015
United States
607-777-4874 (Phone)

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