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Connectivity costs and price efficiency: An event study

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Listed:
  • Alex Frino
  • Ognjen Kovacevic
  • Vito Mollica
  • Robert I. Webb

Abstract

This paper investigates the impact of changes in the speed and pricing of direct market access on market efficiency, as measured by the frequency, duration, and profitability of arbitrage strategies. Two natural experiments on the Eurex exchange are identified: an exchange‐wide improvement in technology reducing message latency, and a reduction in the direct exchange access fee. We analyze their impact on the trading of Euro Stoxx 50 Index futures and the Xtrackers Euro Stoxx 50 Ucits ETF. A decrease in the frequency and duration of arbitrages following both events is observed.

Suggested Citation

  • Alex Frino & Ognjen Kovacevic & Vito Mollica & Robert I. Webb, 2022. "Connectivity costs and price efficiency: An event study," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(2), pages 296-309, February.
    • Handle: RePEc:wly:jfutmk:v:42:y:2022:i:2:p:296-309
    DOI: 10.1002/fut.22281
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    References listed on IDEAS

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