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The impact of tick-size reductions in foreign currency futures markets

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  • Martinez, Valeria
  • Tse, Yiuman

Abstract

The Chicago Mercantile Exchange (CME) recently reduced the tick sizes of three foreign currency futures contracts: the Mexican peso, the Japanese yen, and the euro. We examine the impact of tick-size reductions on market quality in these three futures contracts. We find significant evidence of increased market quality for the Mexican peso contracts, but less significant evidence for the other two contracts.

Suggested Citation

  • Martinez, Valeria & Tse, Yiuman, 2019. "The impact of tick-size reductions in foreign currency futures markets," Finance Research Letters, Elsevier, vol. 28(C), pages 32-38.
    • Handle: RePEc:eee:finlet:v:28:y:2019:i:c:p:32-38
    DOI: 10.1016/j.frl.2018.03.023
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    Cited by:

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    3. Jatin Malhotra & Angelo Corelli, 2021. "The Relative Informativeness of Regular and E-Mini Euro/Dollar Futures Contracts and the Role of Trader Types," Risks, MDPI, vol. 9(6), pages 1-14, June.

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    More about this item

    Keywords

    Currency futures; Informed trading; Price discovery; Tick size;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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