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Do futures lead price discovery in electronic foreign exchange markets?
Author(s) -
Cabrera Juan,
Wang Tao,
Yang Jian
Publication year - 2009
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.20352
Subject(s) - price discovery , futures contract , open outcry , foreign exchange , equity (law) , foreign exchange market , financial economics , forward market , economics , electronic trading , normal backwardation , futures market , monetary economics , business , algorithmic trading , alternative trading system , finance , political science , law
Using intraday data, this study investigates the contribution to the price discovery of Euro and Japanese Yen exchange rates in three foreign exchange markets based on electronic trading systems: the CME GLOBEX regular futures, E‐mini futures, and the EBS interdealer spot market. Contrary to evidence in equity markets and more recent evidence in foreign exchange markets, the spot market is found to consistently lead the price discovery process for both currencies during the sample period. Furthermore, E‐mini futures do not contribute more to the price discovery than the electronically traded regular futures. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 29:137–156, 2009