The relationship between satellite and home market volumes: Evidence from cross-listed Singapore futures contracts
RIS ID
117895
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
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.