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Two Order Books are Better than One? Trading at Settlement (TAS) in VIX Futures
Author(s) -
Huskaj Bujar,
Nordén Lars L.
Publication year - 2015
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.21702
Subject(s) - futures contract , market liquidity , order (exchange) , financial economics , futures market , algorithmic trading , trading strategy , volatility (finance) , economics , order book , open outcry , high frequency trading , forward market , alternative trading system , monetary economics , finance
We examine the effects from the Trading At Settlement (TAS) introduction on VIX futures market quality. We find that the VIX futures market exhibits higher trading activity and better liquidity after the TAS introduction. VIX futures traders use the TAS limit order book to execute large transactions, and TAS helps limit order traders from being picked off by informed traders when the VIX futures price volatility is high. The TAS introduction has created a highly liquid, low‐cost, trading venue. Although the TAS introduction fragments VIX futures trading into two order books, liquidity in the regular order book is not hurt. © 2014 The Authors. Journal of Futures Markets published by Wiley Periodicals, Inc. Jrl Fut Mark 35:506–521, 2015