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Local trader profitability in futures markets: Liquidity and position taking profits

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  • Alex Frino
  • Elvis Jarnecic
  • Roger Feletto

Abstract

This study examines the profitability of local traders on floor‐traded futures markets. Using unique data from the period of floor trading on the Sydney Futures Exchange, local income is decomposed into liquidity and position‐taking profit components. Locals on the trading floor are found to make significant position‐taking profits. Moreover, the ability of locals on the floor to derive position‐taking profits is positively related to order‐flow related information, and negatively related to the presence of exogenous information, local liquidity profits and the length of a locals inventory cycle. Accordingly, this paper characterizes locals as active informed traders. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 30:1–24, 2010

Suggested Citation

  • Alex Frino & Elvis Jarnecic & Roger Feletto, 2010. "Local trader profitability in futures markets: Liquidity and position taking profits," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 30(1), pages 1-24, January.
    • Handle: RePEc:wly:jfutmk:v:30:y:2010:i:1:p:1-24
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    Cited by:

    1. Jagjeev Dosanjh, 2017. "Exchange Initiatives and Market Efficiency: Evidence from the Australian Securities Exchange," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 1-2017, January-A.
    2. Liu, Qingfu & Hua, Renhai & An, Yunbi, 2016. "Determinants and information content of intraday bid-ask spreads: Evidence from Chinese commodity futures markets," Pacific-Basin Finance Journal, Elsevier, vol. 38(C), pages 135-148.
    3. repec:uts:finphd:34 is not listed on IDEAS

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