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Review of Quantitative Finance and Accounting

, Volume 34, Issue 3, pp 313–325 | Cite as

Activity in futures: does underlying market size relate to futures trading volume?

  • Alex Frino
  • Elvis Jarnecic
  • Hui Zheng
Original Research

Abstract

This study investigates the determinants of trading volume in the futures markets and focuses on underlying market characteristics as an explanation for futures trading volume. Four major futures contracts traded on the Sydney Futures Exchange are investigated: the stock price index (SPI); the 90-day bank accepted bill (BAB); the 3-year bond; and the 10-year bond. An important outcome of this study is an identification of the fundamental drivers of trading volume in the futures markets, which have largely gone undocumented in prior research. We find evidence that futures trading volume is related to underlying market characteristics: the size of the Australian superannuation fund investments in equities (for the SPI), short term treasury notes (for the BAB), non-government bonds on issue (for the 3-year contract) and government bonds on issue (for the 10-year contract).

Keywords

Futures markets Trading volume 

JEL Classification

G10 G14 

Notes

Acknowledgments

This research was funded by an Australian Research Council Collaborative Grant (No. C59700105) involving the Sydney Futures Exchange. We gratefully acknowledge the helpful comments of the people at the Securities Industry Research Centre of Asia-Pacific (SIRCA) as well as the participants at the workshop held by the Research and Development Division of the Sydney Futures Exchange.

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Copyright information

© Springer Science+Business Media, LLC 2009

Authors and Affiliations

  1. 1.Finance Discipline, School of BusinessThe University of SydneySydneyAustralia

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