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Small is beautiful? How the introduction of mini futures contracts affects the regular contracts

Stefan Greppmair and Erik Theissen

Journal of Empirical Finance, 2022, vol. 67, issue C, 19-38

Abstract: Using panel data covering 27 years and more than 20 contracts, we analyze how the introduction of mini futures contracts affects the liquidity of the regular contracts. The liquidity of the regular contracts increases and the volatility decreases while the trading volume does not change significantly. Further analysis reveals that only those regular contracts that are traded electronically benefit from the introduction of a mini contract. Our results imply that increased fragmentation is not necessarily harmful to market quality and they reveal a preference of traders for electronic trading protocols.

Keywords: Stock index futures; Mini futures; Liquidity; Market quality (search for similar items in EconPapers)
JEL-codes: G10 G15 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.jempfin.2021.08.003

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Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

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