پویایی تجارت بازارهای آتی جایگزین : شواهدی از آثار لبریز سیاست سود ناویژه

Volatility spillover is well documented among closely related securities. I investigate the relationship between margin policy and trading dynamics of the Nikkei 225 index futures markets of Osaka Securities Exchange (OSE) and Singapore Exchange (SGX). I find that OSE’s margin policy influences trading dynamics across both markets, although it is the less liquid SGX market that performs price discovery. This suggests that policy markers of close substitute markets should coordinate, or at least communicate policy intentions due to policy spillover. SGX’s market design facilitates price discovery, suggesting that a microstructure framework capable of overcoming the liquidity entry barrier is of interest to any futures exchange contemplating contract proliferation.

Margin alterations by SGX have a minor impact on its own market trading dynamics, and no impact on that of ONK. Conversely, consecutive margin increments by OSE influenced not only its own market trading dynamics, but also that of SNK. As such, other than volatility and negative volume spill over effects, there is also a prominent margin policy spill over effect from ONK onto SNK. This has implications for the policy makers of competing futures exchanges. If margin policy maintains the integrity of an exchange’s clearinghouse, then in attempting to balance between market integrity and market share, a futures exchange should be carefully aware of margin policy’s dual role as a regulatory as well as a business tool.40 The strikingly dissimilar margin policies of SGX and OSE have effectively shifted the tide in favour of SGX. In fairness, OSE was under heavy pressure from the Ministry of Finance to conduct a series of margin increments to curb speculative trading, which the authorities attributed to the sharp decline of their equity market in Tokyo. This paper tells the story of two futures exchanges that offer similar contracts traded in the same region and currency at exactly the same time. Liquidity and price discovery are two vital trading services that an exchange provides to its investors. Despite order flow migration from OSE to SGX, ONK average trading volume is still around three times that of SNK.41 However, I find that it is the home market that experiences spill-over effects from a less liquid offshore market in SNK, and not vice versa. I explain this with a simple model to demonstrate how informed and uninformed investors react to the margin differentials between the two markets. I attribute the separation of liquidity and price discovery between ONK and SNK to the two starkly dissimilar margin policies. I examine this issue further by testing whether margin requirements have any significant effects on the price discovery of SNK and ONK, using price reversal ratios and variance ratios. I find that margin requirements do have an adverse impact on a market’s price discovery ability by forcing more mobile informed traders to an alternate trading venue which offers lower trading cost. Although SGX handles a relatively smaller proportion of aggregate Nikkei futures, the results suggest that it processes a larger proportion of informed trades. As such, both markets are able to coexist. While ONK supplies liquidity, SNK performs price discovery for the underlying index. This finding is consistent with previous studies,42 and has implication for the role of margin requirements as a business tool to attract informed investors from a rival exchange. Indeed, margin policy is not the only factor that could give rise to this unique market phenomenon.43 Nevertheless, it is the only contractual specification that varies during the sample period. Whether by chance or through conscientious efforts, SGX has carved a niche market that facilitates information processing. Diminishing barriers on cross-border investment and investors’ increasing demand to trade a wider range of financial securities have heightened inter-exchange competition.Astrategic framework of contract proliferation to overcome the incumbent market’s liquidity to draw sufficient order flows to sustain itself, would be of interest to any futures exchange