Stock market automation and the transmission of information between spot and futures markets

Timothy J. Brailsford, Alex Frino, Allan Hodgson, Andrew West

Research output: Contribution to journalArticleResearchpeer-review

4 Citations (Scopus)

Abstract

This paper examines the impact of automated trading in the stock market on the information transmission between the stock and futures markets. This issue is of particular relevance given the trend of exchanges to introduce automated trading. We focus on the Australian market as its institutional features and recent changes in trading systems have created an ideal environment for examining this issue. We initially find evidence of a substantial bidirectional information flow between the stock and futures markets. The paper then focuses on the period surrounding the move by the Australian stock exchange to automated trading. After the introduction of automated trading, we find a significant change in the information transfer process between the two markets. The findings are consistent with the hypothesis that automated trading results in a richer and more timely information set which accelerates the price discovery process. However, the evidence is not overwhelming and alternative explanations exist.

Original languageEnglish
Pages (from-to)247-264
Number of pages18
JournalJournal of Multinational Financial Management
Volume9
Issue number3-4
DOIs
Publication statusPublished - Nov 1999
Externally publishedYes

Fingerprint

Futures markets
Stock market
Automation
Australian Stock Exchange
Information flow
Price discovery
Transfer process
Information transmission
Trading systems
Information transfer

Cite this

Brailsford, Timothy J. ; Frino, Alex ; Hodgson, Allan ; West, Andrew. / Stock market automation and the transmission of information between spot and futures markets. In: Journal of Multinational Financial Management. 1999 ; Vol. 9, No. 3-4. pp. 247-264.
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Stock market automation and the transmission of information between spot and futures markets. / Brailsford, Timothy J.; Frino, Alex; Hodgson, Allan; West, Andrew.

In: Journal of Multinational Financial Management, Vol. 9, No. 3-4, 11.1999, p. 247-264.

Research output: Contribution to journalArticleResearchpeer-review

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