Introducing contemporaneous open-outcry and e-trading at the Chicago Board of Trade

Carlos Ulibarri

MPRA Paper from University Library of Munich, Germany

Abstract: This study uses a vector error correction (VEC) model to examine price-volume relationships between open outcry and e-trading at the Chicago Board of Trade. We test whether equilibrium price corrections on one system are independent of the other, and whether this price behavior is more sensitive to changes in screen-based volume as opposed to open outcry volume. Error correction terms capture an asymmetric price adjustment process led by open outcry trading. Open outcry volume (market depth) also results in price discovery by dampening price volatility on both markets. These aspects of market microstructure are relevant in identifying how newly introduced e-trading systems operate in relation to established open outcry systems,and how e-trading systems may affect the economic performance of futures exchanges generally.

Keywords: market liquidity; e-trading; vector error correction model (search for similar items in EconPapers)
JEL-codes: G12 G13 G14 (search for similar items in EconPapers)
Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:14821

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