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Cambridge Finance Workshop - Alex Frino

Cambridge Finance Workshop Series are usually held on Thursdays during term time. The workshops are an opportunity for those working in finance to present their latest results or papers.
When May 02, 2019
from 12:30 PM to 01:30 PM
Where Room W4.03, Cambridge Judge Business School
Contact Name
Contact Phone 01223768129
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Alex Frino (University of Wollogong, Australia)

Off-Market Block Trades, Transparency and Information Efficiency: New Evidence from Futures Markets

Off market trades are transactions in securities markets which are executed away from the main market and later reported to the market.  Off market trades are a recent phenomenon in futures markets and while there is a rich body of literature analysing off market trading in equities markets, this is the first study to analyse off market trading in futures markets.  This issue is particularly topical, as the Chicago Mercantile Exchange introduced off-market trading for commodity futures in January 2018 which generated significant debate about the impact of the lack of transparency they create (Parking, April 8 2018, Wall Street Journal).   In this paper, we examine the price impact of off market trades at the time they are executed and the time they are later reported to market.  We find a statistically significant price reaction both around the time they are executed and the time they are later reported.  We conclude that the market learns from trading around the off-market trade and impounds some of the information conveyed by the trade at the time they are executed.  Given that the market reacts significantly at the time the trades are reported, suggesting that the reporting of the trades conveys information to the market, we conclude that delaying reporting of trades has an impact on market price efficiency.  These findings contrast to findings for equities markets which conclude that the withholding of trade information has no impact on the speed of adjustment of the market to the information conveyed by the off-market trade (Gemmill, 1997, Journal of Finance).

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