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Competition for Order Flow and Market Quality in the Gold and Silver Futures Markets


  • Karan Bhanot

    (University of Texas at San Antonio)

  • Valeria Martinez

    (Fairfield University)

  • Zi Ning

    (University of Texas at San Antonio)

  • Yiuman Tse

    (University of Texas at San Antonio)


On December 4, 2006, the side-by-side trading of Commodities Exchange (COMEX) Division’s gold and silver futures contracts was launched on Chicago Mercantile Exchange’s Globex electronic trading platform, as a fight-back against the introduction of copies of these contracts from the Chicago Board of Trade (CBOT). The electronic COMEX saw an immediate surge and steady increase in market share, while market portions of the electronic CBOT and open outcry COMEX continued to drop. The market quality for both full-sized and mini-sized contracts is superior to that of their pit-traded counterparts. Despite its shrinking volume share, the electronic CBOT has comparable market quality conditions to the electronic COMEX. The theoretical models of multimarket trading suggest that a transparent electronic limit order market enhances market quality overall. Moreover, the primary market emerges as the dominant center for trading volume. Our results are broadly consistent with these theoretical predictions.

Suggested Citation

  • Karan Bhanot & Valeria Martinez & Zi Ning & Yiuman Tse, 2008. "Competition for Order Flow and Market Quality in the Gold and Silver Futures Markets," Working Papers 0036, College of Business, University of Texas at San Antonio.
  • Handle: RePEc:tsa:wpaper:0036

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    References listed on IDEAS

    1. Dasgupta, Susmita & Laplante, Benoit & Mamingi, Nlandu, 1998. "Capital markets responses to environmental performance in developing countries," Policy Research Working Paper Series 1909, The World Bank.
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    More about this item


    gold; silver; commodity futures; market quality;

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading


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