Competition for Order Flow and Market Quality in the Gold and Silver Futures Markets

Karan Bhanot, Valeria Martinez, Zi Ning and Yiuman Tse
Additional contact information
Karan Bhanot: University of Texas at San Antonio
Valeria Martinez: Fairfield University
Zi Ning: University of Texas at San Antonio
Yiuman Tse: University of Texas at San Antonio

No 36, Working Papers from College of Business, University of Texas at San Antonio

Abstract: On December 4, 2006, the side-by-side trading of Commodities Exchange (COMEX) Division’s gold and silver futures contracts was launched on Chicago Mercantile Exchange’s Globex electronic trading platform, as a fight-back against the introduction of copies of these contracts from the Chicago Board of Trade (CBOT). The electronic COMEX saw an immediate surge and steady increase in market share, while market portions of the electronic CBOT and open outcry COMEX continued to drop. The market quality for both full-sized and mini-sized contracts is superior to that of their pit-traded counterparts. Despite its shrinking volume share, the electronic CBOT has comparable market quality conditions to the electronic COMEX. The theoretical models of multimarket trading suggest that a transparent electronic limit order market enhances market quality overall. Moreover, the primary market emerges as the dominant center for trading volume. Our results are broadly consistent with these theoretical predictions.

Keywords: gold; silver; commodity futures; market quality (search for similar items in EconPapers)
JEL-codes: G13 G14 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2008-02-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://interim.business.utsa.edu/wps/fin/0036FIN-257-2008.pdf Full text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

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:tsa:wpaper:0081fin

Access Statistics for this paper

More papers in Working Papers from College of Business, University of Texas at San Antonio Contact information at EDIRC.
Bibliographic data for series maintained by Wendy Frost ().