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Are single stock futures used as an alternative during a short‐selling ban?

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  • Bouchra Benzennou
  • Owain ap Gwilym
  • Gwion Williams

Abstract

The response of the single stock futures (SSF) market to a short‐selling ban is investigated. The hypothesis is that traders use SSF as a substitute instrument for short‐selling. A significant increase in SSF trading activity is documented, accompanied by narrower spreads. SSF market volatility did not react during the ban, which suggests that the increased trading activity did not weaken SSF market quality. The quality of the underlying market during the ban period is also assessed, with the results suggesting that changes in SSF market activity had neither positive nor negative effects on the stocks’ liquidity, volatility, and volume.

Suggested Citation

  • Bouchra Benzennou & Owain ap Gwilym & Gwion Williams, 2018. "Are single stock futures used as an alternative during a short‐selling ban?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(1), pages 66-82, January.
    • Handle: RePEc:wly:jfutmk:v:38:y:2018:i:1:p:66-82
    DOI: 10.1002/fut.21849
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    References listed on IDEAS

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    Cited by:

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    2. Edward Curran & Jack Hunt & Vito Mollica, 2021. "Single stock futures and their impact on market quality: Be careful what you wish for," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(11), pages 1677-1692, November.
    3. Jiang, George J. & Shimizu, Yoshiki & Strong, Cuyler, 2022. "Back to the futures: When short selling is banned," Journal of Financial Markets, Elsevier, vol. 61(C).
    4. George J. Jiang & Yoshiki Shimizu & Cuyler Strong, 2020. "When trading options is not the only option: The effects of single‐stock futures trading on options market quality," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(9), pages 1398-1419, September.
    5. Edward Curran & Jack Hunt & Vito Mollica, 2020. "Trading protocols and price discovery: Implicit transaction costs in Indian single stock futures," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(11), pages 1793-1806, November.

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