Clustering in the futures market: Evidence from S&P 500 futures contracts

Abstract

We document trade price clustering in the futures markets. We find clustering at prices of x.00 and x.50 for S&P 500 futures contracts. While trade price clustering is evident throughout time to maturity of these contracts, there is a dramatic change when the S&P 500 futures contract is designated a front-month contract (decrease in clustering) and a back-month contract (increase in clustering). We find that trade price clustering is a positive function of volatility and a negative function of volume or open interest. In addition, we find a high degree of clustering in the daily opening and closing prices, but a lower degree of clustering in the settlement prices.

Share price clustering in Mexico

“…ap Gwilym et al (1998) also evidence a high level of clustering at the market opening on the LIFFE. Schwartz et al (2004) find a similar phenomenon on the Chicago Mercantile Exchange. The findings of ap Gwilym et al (1998) are inconsistent with the price resolution hypothesis, while Schwartz et al (2004) reach the opposite conclusion.…”

Price clustering in E‐mini and floor‐traded index futures

“…Schwartz et al (2004) found significant price clustering among S&P 500 floor-traded futures, demonstrating that clustering is both a positive function of volatility and a negative function of volume. Extending the research of Schwartz et al (2004) and ap Gwilym and Alibo (2003), this research aims to examine the extent of price clustering among regular and E-mini index futures for the DJIA, NASDAQ-100, and S&P 500 indices.…”

Looking for Psychological Barriers in nine European Stock Market Indices

“…Overall, the authors were not able to identify a systematic and consistent pattern at barriers. Different studies concluded that price barriers or at least significant deviations from uniformity also exist in other asset classes such as exchange rates (De Grauwe and Decupere, 1992), bonds (Burke, 2001), commodities (Aggarwal and Lucey, 2007) and derivatives (Schwartz et al, 2004;Chen and Tai, 2011;Jang, 2013;Dowling et al, 2016). Overall, evidence of price barriers in various asset classes seems to be fairly robust.…”