How electronic trading affects bid-ask spreads and arbitrage efficiency between index futures and options
✍ Scribed by Kevin H. K. Cheng; Joseph K. W. Fung; Yiuman Tse
- Publisher
- John Wiley and Sons
- Year
- 2005
- Tongue
- English
- Weight
- 170 KB
- Volume
- 25
- Category
- Article
- ISSN
- 0270-7314
No coin nor oath required. For personal study only.
✦ Synopsis
This paper examines the impact of switching to electronic trading on the relative pricing efficiency of Hang Sang Index futures and options contracts traded on the Hong Kong exchange. The study is motivated by the recent shift in 2000 from the pit to an electronic trading platform. Electronic trading leads to lower bid-ask spreads and less price clustering A substantial part of this paper was written while Kevin H. K. Cheng was a Vice President of the Hong Kong Exchanges and Clearing Limited. This paper is based, in part, on his Ph.D. thesis at Hong Kong Baptist University. The views expressed here are the authors' and not necessarily those of the Hong Kong Exchanges and Clearing Limited or the Bank of China International Holdings Limited. Any errors are the authors' responsibility. We would like to thank the Hong Kong Exchanges and Clearing Limited for providing the data. We are also grateful to Robert Webb (the editor) and an anonymous referee for valuable suggestions.