Further analysis of the speed of response to large trades in interest rate futures

James Richard Cummings and Alex Frino

Journal of Futures Markets, 2010, vol. 30, issue 8, 705-724

Abstract: This study examines the adjustment process in the interest rate futures market following large block trades, by analyzing changes in the levels of quoted prices, bid‐ask spreads, and trading activity. Most of the adjustment in prices and spreads is complete within 12 quote revisions (approximately 70 seconds). Results suggest that block trades stimulate subsequent trading activity, as traders rush to express differences of opinion about the price implication of the block. The market response to block trades exhibits several features in common with the two‐phase response of the US treasury market to macroeconomic announcements described by Fleming, M. J. and Remolona, E. M. (1999). © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 30:705–724, 2010

Date: 2010
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