Expiration-day effects: Does settlement price matter?

Hsieh, Shu‐Fan; Ma, Tai

doi:10.1016/j.iref.2007.05.010

Cited by 14 publications

(17 citation statements)

References 12 publications

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“…First, the Singapore Exchange introduced SGX Nikkei225 Index Futures and SGX Morgan Stanley Capital International (MSCI) Taiwan Index Futures well before these two markets introduced their own futures contracts. Previous studies have shown that these offshore contracts have had considerable influence on the domestic markets (e.g., Chung and Hseu 2008;Covrig et al 2004;Hsieh and Ma 2009;Roope and Zurbruegg 2002). Second, China is the latest market to introduce its own financial futures.…”

mentioning

confidence: 99%

A Tale of Two Index Futures: The Intraday Price Discovery and Volatility Transmission Processes Between the China Financial Futures Exchange and the Singapore Exchange

Guo

Han

Liu

et al. 2013

Emerging Markets Finance and Trade

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This is the first study to examine the intraday price discovery and volatility transmission processes between the Singapore Exchange and the China Financial Futures Exchange. Using one-and five-minute high-frequency data from May to November 2011, the authors find that the Chinese Securities Index 300 index futures dominate Singapore's A50 index futures in both intraday price discovery and intraday volatility transmission. However, A50 futures contracts also make a substantial contribution (26-37 percent) to the price discovery process. These results have important implications for both traders and policymakers.

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confidence: 99%

A Tale of Two Index Futures: The Intraday Price Discovery and Volatility Transmission Processes Between the China Financial Futures Exchange and the Singapore Exchange

Guo

Han

Liu

et al. 2013

Emerging Markets Finance and Trade

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“…2 Stoll and Whaley (1991), and Chen and Williams (1994) investigate whether the change in the settlement of the S&P 500 and NYSE index derivatives from closing to opening index values in June 1987, has had the desired effect of reducing expiration-day effects. By comparing two contemporaneously traded futures on nearly the same underlying, but under different settlement procedures (the TAIEX futures traded in Taiwan and the MSCI-TW futures traded in Singapore), Hsieh and Ma (2009) and Chuang and Hseu (2008) find that the average price settlement is superior to the closing settlement. In 2001, the Taiwan Futures Exchange changed the settlement price for the TAIEX index futures from opening to the average price based on the 15-minute period after the market opening.…”

Section: Literature Reviewmentioning

confidence: 99%

“…However, an increase in volume, volatility, or reversal on expiration days in the post-change period when compared with volume, volatility, or reversal at expirations before the change does not necessarily indicate a more severe expiration-day effect after the change. Hsieh and Ma (2009) take this into account and examine whether different settlement mechanisms affect the severity of expiration-day effects by running regressions of the difference between the measures on expiration days and non-expiration days on settlement system dummies. 7 The price shock should be defined as ðR co i;t À R oc i;t Þfor each stock i according to Vipul (2005).…”

Section: Regression Model and Hypothesesmentioning

confidence: 99%

Expiration‐Day Effects of Stock and Index Futures and Options in Sweden: The Return of the Witches

2013

Journal of Futures Markets

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Recently, the NASDAQ‐OMX Nordic Exchange announced a change of expiration day for the OMXS 30 index futures and options. The OMXS 30 index derivatives used to expire on the fourth Friday of the expiry month while derivatives on individual stocks expired on the third Friday. After the change, derivatives on both the index and individual stocks expire on the third Friday of the expiry month making the third Friday the “quadruple witching Friday” as stock futures, stock options, index futures, and index options expire simultaneously. This contractual change provides a unique opportunity to investigate its impact on expiration‐day effects. The results show that there is hardly any expiration‐day effect due to the derivatives' expirations before or after the contractual change, except the abnormally higher trading volumes at the stock derivatives' expirations before the change, and on the quadruple witching Fridays after the change. Most importantly, there is no significantly intensified abnormal volume, volatility, or price distortion effect due to the seemingly “extraordinary” change in the OMXS 30 index derivatives, despite the quadruple witching expirations after the change. © 2013 Wiley Periodicals, Inc. Jrl Fut Mark 34:868–882, 2014

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“…The literature on the existence of expiration‐day effects pays significant attention to the comparisons of settlement mechanisms. These studies include those of Chung and Hseu (), Feinstein and Goetzmann (), Herbst and Maberly (), Hsieh and Ma (), and Stoll and Whaley (), (), (). Stoll and Whaley () claim that, after a new settlement procedure was adopted that moved the settling of the Standard & Poor’s (S&P) 500 and New York Stock Exchange (NYSE) index futures and options contracts from the close to the opening of the third Friday, anomalies decreased moderately, and the anomalistic difference between S&P 500 index stocks and nonindex stocks became trivial (see Appendix and ).…”

Section: Literature Reviewmentioning

confidence: 99%

Settlement procedures and stock market efficiency

Lin

Chen

2018

Journal of Futures Markets

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This study examines why most derivatives markets that settle on the day following expiration choose the opening rather than the closing price as the final settlement price (FSP), whereas most markets that settle on the expiration day select an average rather than a single price as the FSP. Four exogenous changes in the Taiwan Futures Exchange settlement procedures provide an experimental basis for studying the settlement procedures’ impact on underlying assets. Greatest market efficiency is observed when the FSP is determined by a single rather than an average price and hypothesize that manipulation is prevented at the expense of market quality.

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Expiration-day effects: Does settlement price matter?

Cited by 14 publications

References 12 publications

A Tale of Two Index Futures: The Intraday Price Discovery and Volatility Transmission Processes Between the China Financial Futures Exchange and the Singapore Exchange

A Tale of Two Index Futures: The Intraday Price Discovery and Volatility Transmission Processes Between the China Financial Futures Exchange and the Singapore Exchange

Expiration‐Day Effects of Stock and Index Futures and Options in Sweden: The Return of the Witches

Settlement procedures and stock market efficiency

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