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Introducing the mini-futures contract on Ibex 35: implications for price discovery and volatility transmission

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  • M. Illueca
  • J. Lafuente

Abstract

In November 2001, the Spanish Official Exchange for Financial Futures and options launched the mini IBEX-35 futures contract. Following the seminal paper of Bessembider and Seguin (1992), this paper analyzes the effects of the introduction of the mini-futures contract in the Spanish stock index futures market. The objective of the paper is twofold: a) to analyze the potential destabilizing effect of the mini futures trading activity on the distribution of spot returns, and b) to test whether the mini futures contract significantly contributes to the price discovery process. A non-parametric approach is used to estimate the density function of spot return conditional to both spot and futures trading volume. Empirical findings using 15-minutes intraday data reveals that the mini futures trading activity enhances the price discovery function of the derivative market and does not destabilize spot prices. En Noviembre de 2001, el Mercado Oficial de Futuros y Opciones Financierosen España introdujo el contrato de futuros mini sobre el Ibex 35. En la línea del trabajode Bessembinder y Seguin (1992), este trabajo analiza el efecto de la introducción dedicho contrato sobre el mercado de contado. En particular, hay dos objetivosfundamentales en el trabajo: a) analizar la potencial desestabilización de la actividadnegociadora del mercado de derivados sobre el mercado de contado, y b) estudiar lacontribución del nuevo contrato al proceso de formación de precios del mercado decontado. Para ello, se procede a la estimación no paramétrica de la función de densidadde la rentabilidad del contado, condicional al volumen de negociación tanto el mercadode contado como de futuros. Los resultados empíricos a partir de datos intradía cada15 minutos revelan no solo que el nuevo contrato no tiende a desestabilizar el mercadode contado, sino que además contribuye de forma significativa al proceso de formaciónde precios en el mismo.
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  • M. Illueca & J. Lafuente, 2008. "Introducing the mini-futures contract on Ibex 35: implications for price discovery and volatility transmission," Spanish Economic Review, Springer;Spanish Economic Association, vol. 10(3), pages 197-219, September.
    • Handle: RePEc:spr:specre:v:10:y:2008:i:3:p:197-219
    DOI: 10.1007/s10108-007-9036-0
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    2. Vortelinos, Dimitrios I. & Koulakiotis, Athanasios & Tsagkanos, Athanasios, 2017. "Intraday analysis of macroeconomic news surprises and asymmetries in mini-futures markets," Research in International Business and Finance, Elsevier, vol. 39(PA), pages 150-168.

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    More about this item

    Keywords

    Futures trading; Price discovery; Destabilization; G13;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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