The effect of pit closure on futures trading

Eleni Gousgounis and Esen Onur

Journal of Commodity Markets, 2018, vol. 10, issue C, 69-90

Abstract: Motivated by the Chicago Mercantile Exchange’s (CME) decision to close down most of the futures pits in July of 2015, we analyze how this event may have affected the livestock and treasury futures markets. We find that although the already declining futures pit trading decreased further after the pit closure, it has not completely disappeared. Execution costs, following the pit closure, appear to have increased for livestock futures and declined for treasury futures transactions on the electronic platform. We, also, find that pit users, who had been active in both trading venues, remain active in the electronic market. However, there is no evidence of pit traders (locals) transitioning to the electronic market. Nevertheless, some of them are still active in options pits. When we explore the changes in daily trading patterns, we observe an ongoing shift in the timing of trading hours for livestock futures, but we note that this shift is unlikely to be driven by the pit closure.

Keywords: Pit trading; Futures; Commodity markets; Liquidity (search for similar items in EconPapers)
JEL-codes: G10 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S240585131630054X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jocoma:v:10:y:2018:i:c:p:69-90

DOI: 10.1016/j.jcomm.2017.11.002

Access Statistics for this article

Journal of Commodity Markets is currently edited by Marcel Prokopczuk, Betty Simkins and Sjur Westgaard

More articles in Journal of Commodity Markets from Elsevier
Bibliographic data for series maintained by Catherine Liu ().