Open outcry versus electronic trading: tests of market efficiency on crude palm oil futures

Access to Bank Credit: The Role of Awareness of Government Initiatives for UK SMEs
5 February, 2018
Local Government Formula Funding in England since 2013/14: Lessons for Future Funding Models
12 March, 2018

Open outcry versus electronic trading: tests of market efficiency on crude palm oil futures

Published Paper

Open outcry versus electronic trading: tests of market efficiency on crude palm oil futures

  • Authors: Neil Kellard, Stuart Snaith, and Norzalina Ahmad
  • Abstract:
    Given the widespread transfer of trading to electronic platforms we ask whether such trading is more efficient than open outcry. Examining the Crude Palm Oil market from 1995:06 to 2008:07, our findings, derived from a novel threshold autoregressive relative efficiency measure, are that efficiency is conditional on (i) volatility (ii) the maturity of the futures contract and (iii) the market trading system. Specifically, when volatility is high, open outcry is superior for shorter maturities and electronic trading for longer maturities. These results suggest an efficiency skew and that there may be benefits to the coexistence of trading mechanisms.

    Read more and download the full paper.