Real Effects of Centralized Markets: Evidence from Steel Futures

Thorsten Martin

The Review of Financial Studies, 2025, vol. 38, issue 7, 2140-2181

Abstract: I study the real effects of centralized derivative markets using the staggered introduction of futures contracts for different steel products in the United States. Employing a difference-in-differences strategy, I find that the arrival of centralized futures markets improves price transparency and risk management in the underlying product market: price dispersion decreases and steel producers increase their hedging activity. Moreover, market share is reallocated toward low-cost producers, while product prices, producers’ profits, and valuations decrease. Overall, the results indicate that centralized futures markets foster competition in the product market.

JEL-codes: D22 D47 G14 G32 L11 L61 (search for similar items in EconPapers)
Date: 2025
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