Which market dominates the price discovery in currency futures? The case of the Chicago Mercantile Exchange and the Intercontinental Exchange

Wei-Xuan Li, Clara Chia-Sheng Chen and James Nguyen

Global Finance Journal, 2022, vol. 52, issue C

Abstract: This paper examines the relative contributions to the price discovery process of EUR/USD futures traded in the Chicago Mercantile Exchange (CME) and the Intercontinental Exchange (ICE). We find that the CME contributes 66.4%, 92.7%, and 97.3% to the price discovery process according to information share metrics suggested by Harris, McInish, and Wood (2002), Hasbrouck (1995), and Putninš (2013), respectively. The intraday information share metrics also show that the CME dominates the price discovery in most time periods. We attribute the CME's price discovery leadership to its higher trading activity, lower transaction costs, and higher volatility as compared to the ICE.

Keywords: Price discovery; EUR/USD futures; Foreign exchange futures markets; Liquidity (search for similar items in EconPapers)
JEL-codes: G13 G14 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:52:y:2022:i:c:s1044028320302933

DOI: 10.1016/j.gfj.2020.100593

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