Single stock futures and their impact on market quality: Be careful what you wish for

Edward Curran, Jack Hunt and Vito Mollica

Journal of Futures Markets, 2021, vol. 41, issue 11, 1677-1692

Abstract: We explore the relationship between efficiency and fairness around a natural experiment resulting in the delisting of equity‐linked single stock futures on the National Stock Exchange of India. We provide evidence that the presence of a derivative improves the liquidity of the underlying but decreases the degree of fairness—proxied by manipulation likelihood. Our study highlights that a leveraged derivative entices manipulation of the underlying and that typical inhibitors of manipulation, high execution costs, are conducive to successful market abuse.

Date: 2021
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