We show how trading protocols impede the price discovery process in single stock futures as implicit trade costs outweigh explicit costs. Despite the trade volume dominance, trade costs advantage and leverage efficiency in futures markets, single stock futures account for only 35% of the price discovery vis-ávis the spot market. Futures market's informational efficiency is adversely affected by market frictions in the form of marketwide position limits, minimum contract values, and margin requirements. K E Y W O R D S market wide position limits, minimum contract value, single stock futures, trading protocols 1 | INTRODUCTION Between markets in related securities, larger trading volumes are indicative of market focus, concentration, and price discovery (Eun & Sabherwal, 2003). Save for the time value of money, the financial instrument leading price discovery should be random. However, Fleming, Ostdiek, and Whaley (1996) show that the market with the lowest overall trading cost, based on spreads, brokerage, and slippage costs, will react and incorporate information into prices first. Extant research has assessed price informativeness and transaction costs across index futures, index options, and baskets of underlying securities.

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We explore the relationship between efficiency and fairness around a natural experiment resulting in the delisting of equity-linked single stock futures on the National Stock Exchange of India. We provide evidence that the presence of a derivative improves the liquidity of the underlying but decreases the degree of fairness-proxied by manipulation likelihood. Our study highlights that a leveraged derivative entices manipulation of the underlying and that typical inhibitors of manipulation, high execution costs, are conducive to successful market abuse.