The Impact of Electronic-Trading on the Relative Informational Efficiency of Index Futures Market
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چکیده
This study examines the impact of migration to electronic trading on the relative informational efficiency between an index futures contract and the underlying cash index. The recent move to electronic trading of the Hong Kong Hang Seng Index futures contract provides an opportunity to study how the change affects the effective bid and ask spread in the futures market and the dynamic relationship between the futures and the underlying cash index. Our findings suggest that the migration reduced the effective spread of futures contract. In addition, the information flow from futures to the cash index is strengthened while the instantaneous feedback between futures and cash markets is weakened after the migration. The instantaneous feedback and futures to cash feedback information flow are strengthened in a falling market. However, consistent with the literature, a trading migration from floor to electronic trading reduces the release of lumpy information, which tends to reduce the feedback from futures to cash market. The Impact of Electronic-Trading on the Relative Informational Efficiency of Index Futures Market
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