Nearby and Deferred Quotes: What They Tell Us about Linkages and Adjustments to Information

Mindy Mallory and Philip Garcia

No 285834, 2015 Conference, April 20-21, 2015, St. Louis, Missouri from NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: Recently, the ‘Financialization’ of commodity futures markets, biofuel production, climate change and rising demand potentially have imposed profound shifts in the way commodity futures markets operate. This article examines commodity markets tick-by-tick and quote-by-quote to develop metrics on liquidity and transformation of information. The metrics are based on insights we combined from the sequential trading models on single securities, index futures based on a basket of securities, and special features of commodity futures markets. Correlation between quote revisions in nearby and deferred contracts measure information-based activity, and correlations between revisions of the time lagged nearby and deferred maturity measure the speed at which information is transmitted among the different futures maturities. Information based trading results in near perfect correlation between revisions to bids and offers in nearby and deferred contracts. Within one second information has been fully transmitted from nearby to deferred contracts.

Keywords: Marketing (search for similar items in EconPapers)
Date: 2015-04
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Persistent link: https://EconPapers.repec.org/RePEc:ags:n13415:285834

DOI: 10.22004/ag.econ.285834

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