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Do designated market makers improve liquidity in open‐outcry futures markets?

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  • Yiuman Tse
  • Tatyana Zabotina

Abstract

On February 1, 2002, the Chicago Board of Trade appointed a designated market maker to enhance liquidity in its 10‐year interest rate swap futures contract. This market‐making program is the first of its kind in the open‐outcry futures industry. We find that introduction of the market maker has increased volume and reduced transaction costs. The market maker has also enhanced the speed and the efficiency of price discovery. Overall, the results suggest that the market‐making program is successful in improving liquidity. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:479–502, 2004

Suggested Citation

  • Yiuman Tse & Tatyana Zabotina, 2004. "Do designated market makers improve liquidity in open‐outcry futures markets?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 24(5), pages 479-502, May.
    • Handle: RePEc:wly:jfutmk:v:24:y:2004:i:5:p:479-502
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    Cited by:

    1. Indriawan, Ivan, 2020. "Market quality around macroeconomic news announcements: Evidence from the Australian stock market," Pacific-Basin Finance Journal, Elsevier, vol. 61(C).
    2. Murphy Jun Jie Lee, 2013. "The Microstructure of Trading Processes on the Singapore Exchange," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 4, July-Dece.
    3. 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.
    4. Ivan Indriawan & Qingfu Liu & Yiuman Tse, 2019. "Market quality and the connectedness of steel rebar and other industrial metal futures in China," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 39(11), pages 1383-1393, November.
    5. Murphy Jun Jie Lee, 2013. "The Microstructure of Trading Processes on the Singapore Exchange," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 2-2013, January-A.
    6. Burns, Christopher B. & Kane, Stephen, 2022. "Arbitrage breakdown in WTI crude oil futures: An analysis of the events on April 20, 2020," Resources Policy, Elsevier, vol. 76(C).

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