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Do designated market makers improve liquidity in open-outcry futures markets?

✍ Scribed by Yiuman Tse; Tatyana Zabotina

Publisher
John Wiley and Sons
Year
2004
Tongue
English
Weight
146 KB
Volume
24
Category
Article
ISSN
0270-7314

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✦ Synopsis

Abstract

On February 1, 2002, the Chicago Board of Trade appointed a designated market maker to enhance liquidity in
its 10‐year interest rate swap futures contract. This market‐making program is the first of its
kind in the open‐outcry futures industry. We find that introduction of the market maker has increased
volume and reduced transaction costs. The market maker has also enhanced the speed and the efficiency of price
discovery. Overall, the results suggest that the market‐making program is successful in improving
liquidity. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:479–502, 2004

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