Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/125085 
Year of Publication: 
2015
Series/Report no.: 
Tinbergen Institute Discussion Paper No. 15-082/III
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
We study why a majority of trades still happen during the pit hours, i.e. when the trading pit is open, even after the pit ceased to be a liquid and informative venue. We investigate the case of 30-year U.S. Treasury futures using a ten-years-long intraday data set which contains the introduction of the CME Globex platform as an example of sophistication in electronic trading. We use a structural model to estimate the time-variation in potential factors of the clustering of trading activity around the pit hours, namely price informativeness, information asymmetry and price impact of trades. We find evidence for a feedback mechanism between trading activity and these factors. Across the sample period, price informativeness during the afterhours is a consistently significant factor attracting trade activity. Information asymmetry has a negative effect on afterhours act ivity, particularly during the crisis years. The negative effect of price impact on afterhours activity ceases to be a significant factor from 2007 on, possibly due to improvements in order execution algorithms and electronic trading facilities.
Subjects: 
Afterhours Trading
Market microstructure
Kalman filter
JEL: 
C32
G14
Document Type: 
Working Paper

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