Abstract
This study investigates the trading activity of the Taiwan Futures Exchange (TAIFEX) and Singapore
Exchange Derivatives Trading Limited (SGX‐DT) Taiwan Stock Index Futures markets by analyzing the
intraday patterns of volume and volatility. In addition, the market closure theory, which may explain such
patterns, is examined. Overall, the trading pattern appears to be U‐shaped for the TAIFEX futures and
U+W‐shaped for the SGX‐DT. For the SGX‐DT futures, volatility follows the same pattern
as that of the number of price changes. For the TAIFEX futures, however, after the peak at the close of the spot
market, the volatility in the TAIFEX futures drops consistently until the end of the day while volatility in the
SGX‐DT still reaches a smaller peak at the close of the futures market. In addition, a visual inspection of
the intraday patterns of these two markets shows that the market closure theory can effectively explain the
intraday patterns of these two markets. The empirical results support the market closure theory in that liquidity
demand from traders rebalancing their portfolios before and after market closures creates larger volume and
volatility at both the open and close. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:983–1003,
2002