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Market Insights research

Market Insights Library
Market Quality Indicators

Professor Alex Frino from Faculty of Economics and Business at the University of Sydney leads a team of researchers dedicated to researching trading opportunities and behaviour inherent to SFE contracts.

The team produces a series of papers called 'Market Insights', with papers focusing on a specific area of interest, and often based on information not easily available to groups external to the exchange.

Market Insights Library

2008 Publications

Edition 26: The effects of EUA supply disruptions on market quality in the European carbon market (PDF 605KB)
This paper examines the effects of two supply disruptions on market quality in the European Carbon market. In particular, the effects of (i) the release of 2005 emissions data indicating an oversupply of EUAs for Phase I, and (ii) the restriction on banking Phase I EUAs for use in Phase II, are analysed.
Edition 25: Comparisons of Liquidity and Transactions Costs of Asia-Pacific Stock Index Futures (PDF 663KB)
This paper examines the cost of trading and liquidity of ten leading stock index futures contracts in the Asia-Pacific region, with the objective to provide information which enables global institutions to assess whether the SPI 200™ is sufficiently liquid, and its price is sufficiently volatile, to provide profitable trading opportunities.

2007 Publications

Edition 24: U.S. macro economic information announcements: Opportunities for institutions in the overnight SFE interest rate market? (PDF 651KB)
This edition of Market Insights examines which type of US 8:30am macroeconomic information announcements have the greatest impact on Australian interest rate futures prices, and how long it takes the overnight market to digest this information. This information is relevant to funds considering implementing a global macro strategy based in Australia and high frequency traders focusing on trading around macroeconomic announcements.
Edition 23: Implied Volatility & Credit Spreads: Opportunities for Bond Portfolio Managers (PDF 543KB)
This edition of Market Insights examines the relationship between credit spreads and volatility implied from option prices on interest rate contracts. In particular, we calculate the correlation between credit spreads and implied volatilities and analyse the response time between movements in implied volatility and subsequent movements in credit spreads.
Edition 22: The cost of executing large orders on the SFE: Update II (PDF 581KB)
Providing a second update of this popular publication, this edition of Market Insights estimates slippage costs associated with executing large orders on the Sydney Futures Exchange, with the orders examined including those of the size typically transacted by large institutions such as CTAs and Fund Managers.
Edition 21: Does the SFE offer Trading Opportunities for Global Institutions? June 07 Update (PDF 911KB)In this edition of Market Insights, Professor Alex Frino, Dr Andrew Lepone and George Li from the Disclipline of Finance at the University of Sydney update earlier work reported in the 2nd, 5th, and 13th editions of Market Insights. This work examines the extent of trading opportunities on the SFE for global institutions such as CTAs and Hedge Funds. The methodology and data has been updated, with more relevant contracts for such institutions.
Edition 20: Opportunities for high frequency traders: Intraday patterns in price volatility & liquidity of SFE contracts (PDF 1.25MB)
In this twentieth edition of Market Insights Professor Alex Frino and James Cummings from the Faculty of Economics and Business at the University of Sydney report the results of their research examining intraday patterns in price volatility and liquidity for SFE products over the day and night. their work highlights the points in time that provide some of the best opportunities for traders with a short-term (intraday) trading horizon.
Edition 19: The Cost of Executing Large Orders: SFE 90 Day Bank Bill futures versus OTC products (PDF 500KB)
In this 19th edition of Market Insights, Professor Alex Frino, Dr Andrew Lepone and Jennifer Kruk from the Discipline of Finance at the University of Sydney examine market impact costs associated with short-term interest rate products. Their work brings clarity to some often misunderstood aspects of the Australian capital markets, and highlights a significant opportunity for global investors.
Edition 18: The Impact of Trade Pre-negotiation in SFESPI 200™ Options (PDF 273KB)
This 18th edition of Market Insights provides an assessment of market quality in the SFE SPI 200™ Index Futures options market following the introduction of pre-negotiation. The introduction of pre-negotiation allows brokers to withhold an order from the centralised market for the purpose of soliciting counterparties for trades of any size. After controlling for exogenous factors known to influence market quality measures, this paper documents a decrease in trading costs and an increase in trading activity after the introduction, which we directly attribute to the change in the execution structure.
Edition 17: Managing exposure to the Australian equities market: The relative cost of taking positions in SFESPI 200TM Index Futures and cash market instruments (PDF 438KB)
This paper describesthe transaction costs of taking positions in SFE SPI 200TM Index Futures, including the cost of rolling over positions at contract expiry. These results are compared with the cost of obtaining exposure to the Australian equities market using cash market instruments.
Edition 16: Finessing trades on the Sydney Futures Exchange: Liquidity and price resiliency surrounding large market orders (PDF 929KB)
This paper reports the market impact (slippage) and limit order book recovery time on the SFE using a sample of orders executed during a recent four year period. It highlights the adjustment needed to solicit liquidity from the market and the opportunity cost of failing to complete trades. These findings are useful to institutions seeking to improve their trade execution performance by most effectively balancing the individual components of the trading cost.
Edition 15: Do Derivatives Improve Managed Fund Performance? The benefits of cash equitisation using SFE SPI200™ futures (PDF 244KB)
This paper examines the extent to which the trading of derivatives influences the performance of managed funds. The particular derivative strategy examined is cash equitisation of fund flows, a process which allows fund managers to achieve rapid exposure to index returns at low cost. Using return data from a sample of funds over a 3 year period, we examine the performance of funds which equitise against those that do not
Edition 14: Does the Introduction of a Market Maker improve Market Quality: Evidence from the 3 Year Bond Options Market (PDF 273KB)
This paper provides an assessment of the exchange initiative to introduce a designated market maker in Commonwealth Treasury Bonds in February 2005, and specifically addresses the effects of this augmentation to the market structure, on trading costs to clients, market depth and overall trading activity and highlights the incremental benefits of this initiative.
Edition 13: Does the Sydney Futures Exchange offer Trading Opportunities for Global Institutions? Update II (PDF 220KB)
This paper updates earlier work reported in the 2nd and 5th editions of Market Insights and examines the extent of trading opportunities on the Sydney Futures Exchange for global institutions such as commodity trading advisers and hedge funds.
Edition 12: The SPI 200™ in the Asia-Pacific Region: Comparisons of Liquidity and Transactions Costs against other Stock Index Futures (PDF 256KB)
Compares the cost of trading and liquidity of ten leading stock index futures contracts in the Asia-Pacific region. These include SFE SPI 200™ futures, KOSPI 200 futures, Nikkei 225 futures (Tokyo), Nikkei 225 futures (Singapore), MSCI Taiwan futures, MSCI Singapore futures, Hang Seng Index futures, H-Share Index futures, TOPIX futures and TAIEX futures.

2006 Publications

Edition 11: The Cost of Executing Large Orders on the Sydney Futures Exchange: An Update (PDF 277KB)
Estimates slippage costs associated with executing large orders on the Sydney Futures Exchange. The orders examined include those of the size typically transacted by large institutions such as CTA's and fund managers.
Edition 10: 90 Day New Zealand Bank Bills: A New Trading Opportunity? (PDF 130KB)
Examines the potential trading opportunities offered by the SFE's NZ Bank Bill contract relative to a suite of other short term interest rate futures contracts typically in the investment universe of global institutions. The analysis focuses on the price volatility and correlations, the likely effectiveness of momentum trading rules and slippage associated with large orders.
Edition 9: Sydney Futures Exchange 30 Day Interbank Cash Rate Futures: An emerging opportunity for global institutions (PDF 671KB)
This paper describes the progress of SFE 30 Day Interbank Cash Rate Futures since its first listing on 11 August 2003 and the new trading opportunities in this contract relative to a suite of other overnight and one-month interest rate futures which are commonly used by global institutions such as hedge funds and commodity trading advisors.

2005 Publications

2004 Publications

Market Quality Indicators

Updated quarterly, Market Quality Indicators provides up-to-date quarterly statistics that enable global institutions to evaluate trading opportunities in the five most actively traded contracts and the costs associated with executing trades on the SFE.

Market Quality Indicators: March quarter 2008 - SFE Equity and Interest Rate Futures (PDF 650KB)

Market Insights research

Market Insights Library

Market Quality Indicators

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