A brighter future with lower transactions costs?
Article first published online: 11 JUN 2009
© 2009 Wiley Periodicals, Inc.
Journal of Futures Markets
Volume 29, Issue 8, pages 775–796, August 2009
How to Cite
Nordén, L. (2009), A brighter future with lower transactions costs?. J. Fut. Mark., 29: 775–796. doi: 10.1002/fut.20381
- Issue published online: 11 JUN 2009
- Article first published online: 11 JUN 2009
- Manuscript Received: OCT 2008
- Manuscript Accepted: OCT 2008
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. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:775–796, 2009