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Do designated market makers improve liquidity in open‐outcry futures markets?
Author(s) -
Tse Yiuman,
Zabotina Tatyana
Publication year - 2004
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.10117
Subject(s) - futures contract , market liquidity , futures market , price discovery , market impact , market maker , swap (finance) , financial economics , forward market , transaction cost , monetary economics , market microstructure , business , economics , market efficiency , finance , order (exchange) , paleontology , horse , stock market , biology
On February 1, 2002, the Chicago Board of Trade appointed a designated market maker to enhance liquidity inits 10‐year interest rate swap futures contract. This market‐making program is the first of itskind in the open‐outcry futures industry. We find that introduction of the market maker has increasedvolume and reduced transaction costs. The market maker has also enhanced the speed and the efficiency of pricediscovery. Overall, the results suggest that the market‐making program is successful in improvingliquidity. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:479–502, 2004