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The Launch of a Night Trading Session and Currency Futures Market Liquidity: Evidence from the Thailand Futures Exchange

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  • Woradee Jongadsayakul

    (Department of Economics, Faculty of Economics, Kasetsart University, Bangkok 10900, Thailand)

Abstract

The Thailand Futures Exchange launched USD Futures as the first currency futures contract on 5 June 2012. However, it has been available for night trading since 27 September 2021. This research aims to analyze the effect of adding a night trading session on USD Futures market liquidity and to make a liquidity comparison between day and night session trading. By adding a dummy variable into the vector autoregression model of order 5 to capture the effect of a night session introduction on market liquidity, the results show that market depth and breadth are even stronger after a longer trading session. In addition, the t -test results show the presence of lower tightness but stronger depth and breadth in day session trading than in night session trading, because of the availability of a large number of orders and the ability of the market to have smoother trading in day as opposed to night. Due to the positive effect of extended trading hours on market depth and breadth, TFEX should consider a longer night session in line with other global futures markets. Night traders should also be aware of liquidity risk due to low night session trading volume.

Suggested Citation

  • Woradee Jongadsayakul, 2023. "The Launch of a Night Trading Session and Currency Futures Market Liquidity: Evidence from the Thailand Futures Exchange," JRFM, MDPI, vol. 16(10), pages 1-15, October.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:10:p:442-:d:1257808
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    References listed on IDEAS

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    1. Amihud, Yakov, 2002. "Illiquidity and stock returns: cross-section and time-series effects," Journal of Financial Markets, Elsevier, vol. 5(1), pages 31-56, January.
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    3. Carmen Broto & Matías Lamas, 2016. "Measuring market liquidity in us fixed income markets: a new synthetic indicator," Working Papers 1608, Banco de España.
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