This paper investigates the effects of the migration of the Hang Seng Index futures from open-outcry trading to electronic trading. Using trade data over a window of six months we find evidence that, after the migration, the bid-ask spread of the futures contract decreases and the contribution of the futures price in information transmission increases. Furthermore, the asymmetry in volatility spillover reduces and the open interests of the futures market become smaller. These results suggest that the anonymity in trading and the higher speed of order execution in the electronic trading system attract informed traders to the futures market and increase the information flow.
Electronic trading; Hang Seng Index futures
Econometrics | Finance
Fung, Joseph; Lien, Donald; TSE, Yiuman; and TSE, Yiu Kuen.
Effects of Electronic Trading on the Hang Seng Index Futures Market. (2003). Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/780