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Dual Trading in Futures Markets

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Author Info
 Fishman, Michael J
Longstaff, Francis A
Abstract

With dual trading, brokers trade both for their customers and for their own account. The authors study dual trading and find that customers who are less likely to be informed have higher expected profits with dual trading while customers who are more likely to be informed have higher expected profits without dual trading. They also examine the effects of frontrunning. The authors test the major empirical implications of their model. Consistent with the model, dual traders earn higher profits than nondual traders, and customers of dual-trading brokers do better than customers of nondual-trading brokers. Copyright 1992 by American Finance Association.

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Publisher Info
Article provided by American Finance Association in its journal Journal of Finance.

Volume (Year): 47 (1992)
Issue (Month): 2 (June)
Pages: 643-71
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Handle: RePEc:bla:jfinan:v:47:y:1992:i:2:p:643-71

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  1. Archishman Chakraborty & Bilge Yilmaz, . "Nested Information and Manipulation in Financial Markets," Rodney L. White Center for Financial Research Working Papers 6-00, Wharton School Rodney L. White Center for Financial Research. [Downloadable!]
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  2. Sugato Chakravarty & Asani Sarkar & Lifan Wu, 1998. "Estimating the adverse selection and fixed costs of trading in markets with multiple informed traders," Research Paper 9814, Federal Reserve Bank of New York. [Downloadable!]
  3. Peter R. Locke & Asani Sarkar & Lifan Wu, 1997. "Market liquidity and trader welfare in multiple dealer markets: evidence from dual trading restrictions," Research Paper 9721, Federal Reserve Bank of New York. [Downloadable!]
  4. Sugato Chakravarty & Asani Sarkar, 1998. "An analysis of brokers' trading with applications to order flow internalization and off-exchange sales," Research Paper 9813, Federal Reserve Bank of New York. [Downloadable!]
  5. FOUCAULT, Thierry & LESCOURRET, Laurence, 2001. "Information sharing, liquidity and transaction costs in floor-based trading systems," Les Cahiers de Recherche 742, Groupe HEC. [Downloadable!]
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  6. Erik Theissen, 2002. "Trader Anonymity, Price Formation and Liquidity," Bonn Econ Discussion Papers bgse20_2002, University of Bonn, Germany. [Downloadable!]
  7. Albert J. Menkveld & Asani Sarkar & Michel van der Wel, 2007. "Macro News, Riskfree Rates, and the Intermediary," Tinbergen Institute Discussion Papers 07-086/2, Tinbergen Institute. [Downloadable!]
  8. Albert J. Menkveld & Asani Sarkar & Michel van der Wel, 2007. "Macro news, risk-free rates, and the intermediary: customer orders for thirty-year Treasury futures," Staff Reports 307, Federal Reserve Bank of New York. [Downloadable!]
  9. Peter R. Locke & Asani Sarkar & Lifan Wu, 1996. "Did the good guys lose?: heterogeneous traders and regulatory restrictions on dual trading," Research Paper 9611, Federal Reserve Bank of New York. [Downloadable!]
  10. Sugato Chakravarty & Asani Sarkar, 1997. "Can competition between brokers mitigate agency conflicts with their customers?," Research Paper 9705, Federal Reserve Bank of New York. [Downloadable!]
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  11. Ramadorai, Tarun, 2006. "Persistence, Performance and Prices in Foreign Exchange Markets," CEPR Discussion Papers 5861, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  12. Sugato Chakravarty & Asani Sarkar & Lifan Wu, 1997. "Estimating the adverse selection cost in markets with multiple informed traders," Research Paper 9713, Federal Reserve Bank of New York. [Downloadable!]
  13. H. Henry Cao & Richard K. Lyons & Martin D.D. Evans, 2003. "Inventory Information," NBER Working Papers 9893, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. Sugato Chakravarty & Asani Sarkar, 1997. "Traders' broker choice, market liquidity and market structure," Staff Reports 28, Federal Reserve Bank of New York. [Downloadable!]
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  15. Fang Cai, 2003. "Was there front running during the LTCM crisis," International Finance Discussion Papers 758, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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