How is Futures Trading Affected by the Move to a Computerized Trading System? Lessons from the LIFFE FTSE 100 Contract |
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| Authors: | Christopher L. Gilbert Herbert A. Rijken |
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| Affiliation: | The authors are respectively from Dipartimento di Economica, Universitàdegli Studi di Trento, Italy and FEWEB, Vrije Universiteit, Amsterdam, The Netherlands. |
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| Abstract: | Abstract: We consider the impact of the May 1999 move to screen trading of the LIFFE FTSE 100 index futures contract. This resulted in a narrowing of the effective spread. Spread determinants are broadly similar in the two regimes. The narrowing of the spread appears due to increased competition among traders and a decline in tick-level volatility rather than to the way these or other variables affect the spread. Market depth appears largely unaffected. Under screen trading, realized spreads widen as more limit orders are taken up rather than in relation to order size per se . |
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| Keywords: | market microstructure futures computerized trading systems spreads depth |
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