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A Model to Quantify the Risk of Cross-Product Manipulation: Evidence from the European Government Bond Futures Market

Author

Listed:
  • Alexis Stenfors

    (University of Portsmouth)

  • Kaveesha Dilshani

    (University of Technology Sydney)

  • Andy Guo

    (University of Technology Sydney)

  • Peter Mere

    (Macquarie University)

Abstract

Cross-product manipulation involves manipulating one financial product to profit from the subsequent reaction in a different but related product. In this paper, we develop a simple model that researchers and regulators can use to scan for the susceptibility of two markets to such misconduct. We also test the model empirically on a set of government bond futures contracts using a complete EUREX ultra-high-frequency dataset. Our findings show that cross-product manipulation is feasible across bond futures with different underlying maturities, issuers and contract expiry dates. The results suggest that cross-product manipulation might be widespread despite an increasing crackdown by regulators and prosecutors.

Suggested Citation

  • Alexis Stenfors & Kaveesha Dilshani & Andy Guo & Peter Mere, 2023. "A Model to Quantify the Risk of Cross-Product Manipulation: Evidence from the European Government Bond Futures Market," Working Papers in Economics & Finance 2023-06, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.
    • Handle: RePEc:pbs:ecofin:2023-06
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Bond futures; fixed income; cross-product manipulation; cross-market manipulation; limit order book; market microstructure; ramping; related securities; spoofing; trading; trade surveillance;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G1 - Financial Economics - - General Financial Markets

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