Effects of the COVID-19 Pandemic on Derivatives Markets: Evidence from Global Futures and Options Exchanges

Journal of Futures Markets, forthcoming

63 Pages Posted: 28 Dec 2021 Last revised: 27 Feb 2022

See all articles by Ekaterina E. Emm

Ekaterina E. Emm

Seattle University

Gerald D. Gay

Georgia State University - Department of Finance

Han Ma

Shanghai University of Economics and Finance

Honglin Ren

Renmin University of China - School of Business

Date Written: December 15, 2021

Abstract

We examine key developments in trade-related activity in derivatives markets during the COVID-19 pandemic. Using a unique database spanning 113 exchanges and 40 countries, we find significant large increases in volumes and open interest using event study methods. Further, drawing upon techniques from network theory, we find greater market interconnectedness among countries and geographic regions along with notable changes in market centrality. Using data available for U.S. markets, we then examine the response of exchanges to the increased market uncertainty and find large overall increases and more frequent changes to margin requirements. Consistently, we observe a historically large increase in client funds held at futures commission merchants to support traders’ margin requirements. We also find a considerable drop in trader participation driven mainly by non-commercial, speculative traders along with an increase in the percent of open interest held by commercial shorts and non-commercial longs.

Keywords: Futures market, commodities, derivatives, volume, open interest, financial crisis, networks, COVID-19

JEL Classification: G12, G13, G14, G15, G23, L14

Suggested Citation

Emm, Ekaterina E. and Gay, Gerald D. and Ma, Han and Ren, Honglin, Effects of the COVID-19 Pandemic on Derivatives Markets: Evidence from Global Futures and Options Exchanges (December 15, 2021). Journal of Futures Markets, forthcoming, Available at SSRN: https://ssrn.com/abstract=3994700 or http://dx.doi.org/10.2139/ssrn.3994700

Ekaterina E. Emm

Seattle University

900 Broadway
Seattle, WA 98122
United States

Gerald D. Gay

Georgia State University - Department of Finance ( email )

Robinson College of Business
Atlanta, GA 30303-3083
United States
404-413-7321 (Phone)
404-413-7312 (Fax)

Han Ma

Shanghai University of Economics and Finance ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

Honglin Ren (Contact Author)

Renmin University of China - School of Business ( email )

Beijing
China

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