Title

The relationship between satellite and home market volumes: Evidence from cross-listed Singapore futures contracts

RIS ID

117895

Publication Details

Frino, A., Harris, F. H.deB., Lepone, A. & Wong, J. Boon. (2013). The relationship between satellite and home market volumes: Evidence from cross-listed Singapore futures contracts. Pacific-Basin Finance Journal, 24 301-311.

Abstract

This paper examines the order flow diversion hypothesis using crosslisted Singapore Exchange (SGX) futures contracts to test if the existence of an off-shore market causes the order migration of futures volume from the domestic to foreign markets. Using structural equation systems estimation based on daily turnover, we observe that a 10% increase in the turnover of the SGX traded Nikkei 225 leads to an increase of 6.6% for the Nikkei 225 traded on the OSE. Further examination of the cross-listed Nifty and the MSCI-Taiwan Index futures provide similar evidence of a positive and significant relationship. We also observe that off-shore index futures have a positive and significant impact on domestic component stocks' turnover. Evidence in this study supports the rejection of the order-flow hypothesis, and suggests that a mutually beneficial relationship exists between cross-border exchanges

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Link to publisher version (DOI)

http://dx.doi.org/10.1016/j.pacfin.2013.04.003