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Detecting the risk of cross-product manipulation in the EUREX fixed income futures market

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  • Stenfors, Alexis
  • Dilshani, Kaveesha
  • Guo, Andy
  • Mere, Peter

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

  • Stenfors, Alexis & Dilshani, Kaveesha & Guo, Andy & Mere, Peter, 2024. "Detecting the risk of cross-product manipulation in the EUREX fixed income futures market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:intfin:v:92:y:2024:i:c:s1042443124000507
    DOI: 10.1016/j.intfin.2024.101984
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    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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