The Impact of Option Listing on the Trading Activity of Turkcell’s American Depository Receipt (ADR)

Abstract

We investigate the impact of the introduction of options on the market microstructure aspects of the NYSE-traded Turkcell İletişim Hizmetleri A.Ş., (Turkcell) ADR by studying changes in fundamental market liquidity metrics before and after the option (TKC) listing. We find that both daily relative quoted spreads and daily effective spreads decrease after the option introduction. Additionally, we show that the number of trades increases statistically significantly, while volatility, trade size and trading volume show no statistically significant change. We conclude that the introduction of options has a positive impact on the trading of the underlying asset, Turkcell's ADR, reducing trading costs significantly while increasing liquidity.