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The intra‐day price discovery process between the Singapore Exchange and Taiwan Futures Exchange
Author(s) -
Roope Matthew,
Zurbruegg Ralf
Publication year - 2002
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.2215
Subject(s) - futures contract , price discovery , forward market , index (typography) , open outcry , reputation , futures market , financial economics , listing (finance) , economics , financial market , business , algorithmic trading , finance , alternative trading system , computer science , world wide web , social science , sociology
This paper focuses on the increasing competition between exchanges for listing similar index futures contractsand the impact this has on information dissemination between various markets. Specifically, using both theHasbrouck and Gonzalo–Granger methodologies for extracting the information content held in each market, acomparison of information efficiencies between the Singapore Exchange and the Taiwan Futures Exchange is examinedfor Taiwan Index Futures listed in both markets. The results show not only a common stochastic trend betweenindex futures and their underlying indices, but also provide strong evidence to suggest price discovery primarilyoriginates from the Singapore futures market. There are direct implications of this result for both financialexchanges and traders—in particular, that traders realize price determination can arise from both futuresmarkets, and the need for exchanges to maintain a reputation as an information center for these similarly tradedfinancial instruments. © 2002 John Wiley & Sons, Inc. Jrl Fut Mark 22: 219–240, 2002