Is it time to reduce the minimum tick sizes of the E-mini futures?

Kurov, Alexander; Zabotina, Tatyana

doi:10.1002/fut.20119

Cited by 14 publications

(3 citation statements)

References 55 publications

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“… Tick size -Tick size is the minimum price movement in the contract. Theory suggests that a decrease in the tick size results in an increase in the market liquidity (see Brown et al (1991), Chordia and Subrahmanyam (1995), Ahn et al (1996), Frino (1997) and Kurov and Zabotina (2005), improvement in the price discovery and informational efficiency (See Kurov 2008). Some studies have also concluded that a decrease in the tick size results in improved liquidity for highly liquid stocks and the opposite holds for the less liquid stocks (Harris (1994), Niemeyer & Sandås (1994); Ahn et al (1996); Grossman et al (1997), Goldstein & Kavajecz (2000).…”

Section: 26mentioning

confidence: 99%

Determinants of Successful Agri - Futures Contracts in India

Agrawal

Sehgal²,

Agrawal³

2019

AJFA

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The study empirically examines the factors which impact the success of the Agri commodity futures contracts. Daily data from July 2012 to July 2017 is used for 22 commodities traded on the three national commodity derivatives exchanges and analyzed in a panel data analysis framework. The results of the study suggest that higher volatility in the spot and futures market, competition in terms of multiple exchange listing, the age of the futures contract, lot size and tick size increase the success potential of the agri futures contract. The international listing, the imposition of Commodity transaction tax, a higher number of levels in the value chain and greater geographical coverage in the spot market reduces the liquidity for the contract. Thus, the study identifies important market characteristics and elements of contract design that have implications for the success of agri commodities futures contract in India.

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Section: 26mentioning

confidence: 99%

Determinants of Successful Agri - Futures Contracts in India

Agrawal

Sehgal²,

Agrawal³

2019

AJFA

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“…However, the bid and ask quotes for E-mini futures are unavailable. Kurov and Zabotina (2005) demonstrated that the minimum E-mini futures bid-ask spread is binding. Thus, the authors use the futures trade prices minus and plus one minimum tick size to proxy for the bid and ask prices of E-mini futures, respectively.…”

Section: T)]e R(tϫt)mentioning

confidence: 99%

Decimalization, ETFs and futures pricing efficiency

Chen

Chou

Chung

2008

Journal of Futures Markets

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This study investigates the impact of decimalization (penny pricing) on the arbitrage relationship between index exchange‐traded funds and E‐mini index futures. The empirical results reveal that subsequent to penny pricing, there is a significant fall in the mean ex ante arbitrage profit, especially in the cases with higher transaction costs. Using the ordinary least squares and quantile regressions to control for the influences of changes in other market characteristics, it is found that the overall pricing efficiency has deteriorated in the post‐decimalization period. These results are consistent with the hypothesis that, due to the lowered market depth and increased execution risks, the introduction of decimalization has in general resulted in weakening the ability and the willingness of arbitrageurs to initiate arbitrage trades, which subsequently leads to a reduction in the general efficiency of the cash/futures pricing system. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 29:157–178, 2009

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“…Another strand of literature discusses the relationship between the tick-size and futures transactions costs. Kurov and Zabotina (2005) document that the minimum tick sizes of the E-mini S&P 500 and E-mini Nasdaq-100 futures contracts act as binding constraints on the bid-ask spreads by not allowing the spreads to decline to competitive levels. The authors suggest that the Chicago Mercantile Exchange (CME) should decrease the minimum tick sizes of the futures contracts, and they claim that a tick-size reduction is likely to result in lower futures trading costs.…”

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confidence: 99%

Futures trading costs and market microstructure invariance: Identifying bet activity

Hou,

Nordén,

2024

Journal of Futures Markets

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Market microstructure invariance (MMI) stipulates that trading costs of financial assets are driven by the volume and volatility of bets, but these variables are inherently difficult to identify. With futures transactions data, we estimate bet volume as the trading volume of brokerage firms that trade on behalf of their clients and bet volatility as the trade‐related component of futures volatility. We find that the futures bid–ask spread lines up with bet volume and bet volatility as predicted by MMI, and that intermediation by high‐frequency traders does not interfere with the MMI relation.

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Is it time to reduce the minimum tick sizes of the E-mini futures?

Cited by 14 publications

References 55 publications

Determinants of Successful Agri - Futures Contracts in India

Determinants of Successful Agri - Futures Contracts in India

Decimalization, ETFs and futures pricing efficiency

Futures trading costs and market microstructure invariance: Identifying bet activity

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