Title

Connectivity costs and price efficiency: An event study

Publication Name

Journal of Futures Markets

Abstract

This paper investigates the impact of changes in the speed and pricing of direct market access on market efficiency, as measured by the frequency, duration, and profitability of arbitrage strategies. Two natural experiments on the Eurex exchange are identified: an exchange-wide improvement in technology reducing message latency, and a reduction in the direct exchange access fee. We analyze their impact on the trading of Euro Stoxx 50 Index futures and the Xtrackers Euro Stoxx 50 Ucits ETF. A decrease in the frequency and duration of arbitrages following both events is observed.

Open Access Status

This publication is not available as open access

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Link to publisher version (DOI)

http://dx.doi.org/10.1002/fut.22281