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Small is beautiful? How the introduction of mini futures contracts affects the regular contracts

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  • Greppmair, Stefan
  • Theissen, Erik

Abstract

Using panel data covering 27 years and more than 20 contracts, we analyze how the introduction of mini futures contracts affects the liquidity of the regular contracts. The liquidity of the regular contracts increases and the volatility decreases while the trading volume does not change significantly. Further analysis reveals that only those regular contracts that are traded electronically benefit from the introduction of a mini contract. Our results imply that increased fragmentation is not necessarily harmful to market quality and they reveal a preference of traders for electronic trading protocols.

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  • Greppmair, Stefan & Theissen, Erik, 2022. "Small is beautiful? How the introduction of mini futures contracts affects the regular contracts," Journal of Empirical Finance, Elsevier, vol. 67(C), pages 19-38.
    • Handle: RePEc:eee:empfin:v:67:y:2022:i:c:p:19-38
    DOI: 10.1016/j.jempfin.2021.08.003
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    More about this item

    Keywords

    Stock index futures; Mini futures; Liquidity; Market quality;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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