Concentrated trading in the foreign exchange futures markets: Discretionary liquidity trading or market closure?

A paper documents several empirical regularities in the foreign exchange futures markets: 1. Intraday volumes are U-shaped. 2. Intraday volatilities are not U-shaped. 3. Volume and volatility for the European currency contracts are greater when European banks are active in the spot market than after...

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Bibliographic Details
Published in:The journal of futures markets 1998-05, Vol.18 (3), p.343-362
Main Authors: Ferguson, Michael F., Mann, Steven C., Schneck, Leonard J.
Format: Article
Language:English
Subjects:
Capital market
Currencies
Currency
Economic models
Euromarkets
Exchange rates
Financial economics
Foreign exchange
Foreign exchange futures
Foreign exchange markets
Futures
Futures market
Futures trading
Liquidity
Studies
Volatility
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Summary:A paper documents several empirical regularities in the foreign exchange futures markets: 1. Intraday volumes are U-shaped. 2. Intraday volatilities are not U-shaped. 3. Volume and volatility for the European currency contracts are greater when European banks are active in the spot market than after normal London business hours. 4. Yen futures trading in Chicago is more greatly affected than either of the European currencies by the introduction of trading in Singapore. Changes are not found in trading patterns that are predicted by the market closure model when nontrading hours are significantly reduced. Volume and volatility for the European contracts are higher when European banks are active in the spot market. Moreover, volatility for these contracts steadily declines as the European night falls. Finally, the Asian currency is more greatly influenced by the introduction of trading in Asia than the European currencies.
ISSN:0270-7314
1096-9934
DOI:10.1002/(SICI)1096-9934(199805)18:3<343::AID-FUT7>3.0.CO;2-8