Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/209651 
Year of Publication: 
2019
Series/Report no.: 
CFR Working Paper No. 19-06
Publisher: 
University of Cologne, Centre for Financial Research (CFR), Cologne
Abstract: 
We analyze how the introduction of a mini futures contract affects the liquidity of the regular contract. We use a panel data set that covers more than 20 years and more than 20 contracts. We use a traditional difference-in-differences methodology as well as a synthetic control group approach (Abadie and Gardeazabal (2003), Abadie, Diamond and Hainmueller (2015)). We find that the liquidity of the regular contracts increases and the volatility decreases upon the introduction of a mini futures contract when the regular contract is traded electronically whereas the reverse is true when it is floor-traded. While total trading volume increases upon the introduction of the mini contract, the volume of the regular contracts does not change significantly. Overall, our results imply that the introduction of mini futures contracts is beneficial. They also confirm the superiority of electronic trading over floor-based trading.
Subjects: 
Stock index futures
Mini futures
Liquidity
Market quality
JEL: 
G10
G15
Document Type: 
Working Paper

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