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A Brighter Future with Lower Transaction Costs?
Stockholm University, Faculty of Social Sciences, School of Business.
2009 (English)In: Journal of futures markets, ISSN 0270-7314, E-ISSN 1096-9934, Vol. 29, 331-356 p.Article in journal (Refereed) Published
Abstract [en]

Recently, the OMX Nordic Exchange reduced the exchange fee for trading the OMXS 30 index futures with more than 22%. The reduction in exchange fees provides this study with a unique opportunity to investigate the effects of a change in fixed transaction costs on futures market liquidity, trading activity, volatility, futures pricing efficiency, and the futures exchange’s revenues. The results show a ceteris paribus increase in futures trading volume with 19%, a 27% decrease in futures bid-ask spread, and a 27% increase in volatility, as a result of the futures exchange fee reduction, whereas the pricing efficiency of the futures contract and the exchange’s revenues are unaffected by the change in transaction costs. The exchange fee reduction has improved futures market liquidity at the cost of higher volatility. Moreover, the attractiveness and competitiveness of the futures exchange has increased relative alternative trading venues, without a loss of revenues in the process.

Place, publisher, year, edition, pages
2009. Vol. 29, 331-356 p.
National Category
Business Administration
Research subject
Business Administration
URN: urn:nbn:se:su:diva-43353ISI: 000267182000005OAI: diva2:356007
Available from: 2010-10-09 Created: 2010-10-09 Last updated: 2010-10-15Bibliographically approved

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