Futures exchanges show cost competition and risks

2015 ◽  
Keyword(s):  
Futures Markets ◽  
Futures Contracts ◽  
Content Type ◽  
Energy Futures ◽  
Downward Shift ◽  
Market Disruption ◽  
Futures Exchanges ◽  
Transaction Fees ◽  
Fierce Competition ◽  
Derivatives Markets

Subject Implications of change in the energy futures markets. Significance The world's two largest futures exchanges, CME Group and Intercontinental Exchange (ICE), have emerged through a series of mergers and acquisitions as an effective duopoly in the energy futures market. Both operate as 'vertical silos'; each owns a clearinghouse that processes all financial and commodity futures contracts traded on the exchange. NASDAQ is now readying to challenge this CME-ICE duopoly and its vertical model. Impacts Other derivatives markets have seen a downward shift in prices, but transaction fees remain high for energy contracts. Energy markets competition may follow the fierce competition seen in equity markets. Government bond transactions may see similar market disruption.

scholarly journals The Future of Price: Communicative Infrastructures and the Financialization of Indian Tea

2015 ◽  
Vol 31 (1) ◽  
pp. 4-29 ◽  
Author(s):  
Sarah Besky
Keyword(s):  
Futures Markets ◽  
Digital Technologies ◽  
Northeast India ◽  
Futures Contracts ◽  
Face To Face ◽  
Tea Industry ◽  
Open Outcry ◽  
The Government ◽  
Derivatives Markets ◽  
Indian Tea

For more than 150 years, most tea grown on plantations in northeast India has been sold in open-outcry auctions in Kolkata. In this essay, I describe how, in 2009, the Tea Board of India, the government regulator of the tea trade, began to convert auctioning from a face-to-face outcry process to a face-to-computer digital one. The Tea Board hoped that with the implementation of digital technologies, trade would soon revolve around the buying and selling of futures contracts, not individual lots of tea. Despite these efforts, the tea industry has thus far resisted all attempts at financialization. That so prominent a commodity as tea has yet to be financialized provides a unique opportunity to examine the how of financialization—the governmental and technical steps that precede futures and other kinds of derivatives markets. Futures markets rely on a standardized notion of price and of the material things being priced. The story of Indian tea’s resistance to financialization shows how such standardization requires not just a disentangling of commodities at the level of productive infrastructure (that is, the separation of individual trader and thing being traded) but also a reworking of the communicative infrastructure of trading. In this essay, I analyze this reworking by examining the effort to reform how tea is priced at auction. Specifically, I describe a transition in tea valuation from socially embedded price stories to standardized price scenarios.

Dynamic co-movements and directional spillovers among energy futures

2020 ◽  
Vol 37 (4) ◽  
pp. 673-696 ◽  
Author(s):  
Sercan Demiralay ◽  
Nikolaos Hourvouliades ◽  
Athanasios Fassas
Keyword(s):  
Crude Oil ◽  
Futures Markets ◽  
Spillover Effects ◽  
Time Varying ◽  
Content Type ◽  
Energy Futures ◽  
Risk Transfer ◽  
Volatility Transmission ◽  
Heating Oil ◽  
Practical Implications

Purpose This paper aims to examine dynamic equicorrelations (DECO) and directional volatility spillover effects among four energy futures markets, namely, West Texas Intermediate crude oil, heating oil, natural gas and reformulated blendstock for oxygenate blending gasoline, by using a multivariate fractionally integrated asymmetric power ARCH–DECO–generalized autoregressive conditional heteroskedasticity (GARCH) model and the spillover index technique. Design/methodology/approach The empirical analysis uses the dynamic equicorrelation model of Engle and Kelly (2012) to examine time-varying correlations at equilibrium. The authors further analyze dynamic volatility transmission among energy futures by using Diebold and Yilmaz (2012) dynamic spillover index based on generalized value-at-risk framework. Findings The empirical results provide evidence of heightened equicorrelations at times of financial turmoil. More specifically, the dynamic spillover analysis shows that volatility is transmitted predominantly from crude oil to the other markets and risk transfer among four markets exhibits asymmetries. Spillovers are found to be highly responsive to dramatic events such as the 9/11 terror attack, 2008–2009 global financial crisis and 2014–2016 oil glut. Practical implications The results of this study have important practical implications for investors, portfolio managers and energy policymakers as the presence of time-varying co-movements and spillovers suggests the need for dynamic trading strategies. There are also implications regarding risk management practices, as there is evidence of increased volatility transmission at times of financial turmoil and uncertainty. Finally, the results provide insights to policymakers in a better understanding of the spillover dynamics. Originality/value This paper investigates the DECOs and spillover effects among crude oil, natural gas, heating oil and gasoline futures markets. To the best of the knowledge, this is one of a few studies that examine co-movements and risk transfer in energy futures in a comprehensive framework.

Measuring volatility spillovers and asymmetric responses of Agri commodity prices: evidence from spices and rubber futures in India

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Saji Thazhugal Govindan Nair
Keyword(s):  
Futures Markets ◽  
Commodity Prices ◽  
Futures Contracts ◽  
Spot Markets ◽  
Content Type ◽  
Volatility Spillovers ◽  
Price Series ◽  
Long Run ◽  
Short Run ◽  
Asymmetric Responses

Purpose This paper aims to investigate price responses and volatility spillovers between commodity spot and futures markets. The study ultimately seeks the evidence-based claims on the efficiency of the long run and short run horizontal price transmissions from futures markets to spot markets. Design/methodology/approach This study used the most recent daily price series of pepper, cardamom and rubber, during the period 2004–2019, use “cointegration-ECM-GARCH framework” and verify the persisting validity of the “expectancy theory” of commodity futures pricing. Findings The results offer overwhelming evidence of futures market dominance in the price discoveries and volatility spillovers in spot markets. However, this paper finds asymmetric responses between cash and futures prices across markets. The hedging efficiency of futures contracts is commodities specific’ where spices futures are more efficient than the rubber futures. Practical implications The study passes on vital information to the producers and traders of spices and rubber who have a potential interest in the use of futures contracts to make profits from arbitrage between futures and cash markets. Originality/value The paper is unique in terms of understanding asymmetric price linkages in markets for plantation crops.

A risk model to compute the volatility and the need for collateral margins in energy futures contracts in Brazil

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Pedro Argento ◽  
Marcelo Cabus Klotzle ◽  
Antonio Carlos Figueiredo Pinto ◽  
Leonardo Lima Gomes
Keyword(s):  
At Risk ◽  
Value At Risk ◽  
Risk Model ◽  
Extreme Values ◽  
Safety Margin ◽  
Conditional Value At Risk ◽  
Futures Contracts ◽  
Content Type ◽  
Energy Futures ◽  
Risk Dimensions

Purpose Brazil is characterized by the inexistence of a more robust system of guarantees and rules to minimize risks and protect agents in energy futures contracts. In this sense, this study aims to answer the question of how a centralized clearing agent can compute safety margin requirements to help reduce the systemic risk of the energy futures contracts market in Brazil. Design/methodology/approach The intermediate steps and specific objectives are to analyze the volatility behavior, identify the autoregressive conditional heteroscedasticity effects and model the variance of the return series. Based on this, the authors calculate the value-at-risk and conditional value-at-risk metrics for the energy futures contracts. As a robustness test, the authors added a peak over threshold methodology from extreme values theory. Findings In general, monthly products require margins because of their higher variance. With the asymmetrical distribution of returns, the authors needed to consider different maintenance margins for the long and short positions. It was also shown that two guarantee margins were required to secure the contracts as follows: the initial margin and the maintenance margin. The three factors that defined the size of the maintenance margin the volatility, skewness and kurtosis of the return series. Originality/value The contribution of this study lies in promoting the understanding of the risk dimensions of the energy derivatives market in Brazil and it offers concrete recommendations for how to mitigate this risk through market mechanisms and structures. Similar arrangements can be applied to other emerging markets.

SMEs strategic networks and innovative performance: a relational design and methodology for knowledge sharing

2020 ◽  
Vol 24 (6) ◽  
pp. 1369-1392 ◽  
Author(s):  
Elena-Mădălina Vătămănescu ◽  
Juan-Gabriel Cegarra-Navarro ◽  
Andreia Gabriela Andrei ◽  
Violeta-Mihaela Dincă ◽  
Vlad-Andrei Alexandru
Keyword(s):  
Knowledge Sharing ◽  
Structural Equation ◽  
Structural Model ◽  
Resource Scarcity ◽  
Content Type ◽  
Strategic Networks ◽  
Innovative Performance ◽  
Positive Effects ◽  
Model Combining ◽  
Fierce Competition

Purpose In the context of resource scarcity, the affiliation of small and medium-sized enterprises (SMEs) to strategic networks has emerged as a fruitful path towards knowledge sharing as a reaction to fierce competition and with a view to enhance their innovative performance. In this framework, this paper aims to investigate the influence exerted by a specific relational design (i.e. types of strategic networks) and methodology (i.e. channels and content) of knowledge sharing on SMEs innovative performance. Design/methodology/approach A questionnaire-based survey with 102 top managers of European SMEs in the industrial field was conducted from June to August 2019 and a partial least squares structural equation modelling technique was used. The database was initially filtered to ensure the adequacy of the sample and data was analysed using the statistics software package SmartPLS 3.0. Findings The results concluded that the structural model explains 38.5% of the variance in SMEs innovative performance, indicating the positive effects exerted by offline and online and by competitive knowledge sharing on the dependent variable. Research implications The study has both theoretical and practical implications in that it sets out a reference point for the key performance indicators for strategic networks structure, formation and development and, implicitly, for the selection of the most efficient relational design and methodology. Originality/value The pivotal originality elements reside in the advancement of a more comprehensive conceptual and structural model combining a two-fold operationalization of SMEs strategic networks (founded on business abilities or on the personality of the partner) and in the investigation of knowledge transfer processes at the inter-organizational levels within a context-centric approach.

Hedge Funds, Volatility, and Liquidity Provision in Energy Futures Markets

2007 ◽  
Vol 9 (4) ◽  
pp. 10-38 ◽  
Author(s):  
Michael S. Haigh ◽  
Jana Hranaiova ◽  
James A. Overdahl
Keyword(s):  
Hedge Funds ◽  
Futures Markets ◽  
Energy Futures ◽  
Liquidity Provision ◽  
Energy Futures Markets

Markets are overreacting to US price and rates risks

2021 ◽  
Keyword(s):  
Federal Reserve ◽  
Futures Markets ◽  
The United States ◽  
Oil Price ◽  
Bond Markets ◽  
Crude Oil Price ◽  
Bond Yields ◽  
Content Type ◽  
Bond Yield ◽  
Ongoing Support

Significance The continuation of the modest manufacturing downturn follows the recent report of slower third-quarter GDP growth. Despite slower growth, bond markets are challenging an attempt by the Federal Reserve (Fed) to delink tapering from tightening by bringing forward their forecasts for rate increases: futures markets are pricing in two 25-basis-point rate hikes by end-2022. Impacts Equities are at a record high in the United States; providing ongoing support for this, real US bond yields remain in negative territory. The Brent crude oil price is near its highest since 2014; further upside will be limited but it is likely to stay high well into 2022. Germany’s ten-year bond yield, negative since April 2019, has risen by 40 basis points since end-August and will soon turn positive.

Are mom-and-pop and professional hosts actually competing against hotels?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ruggero Sainaghi ◽  
Rodolfo Baggio
Keyword(s):  
Mutual Information ◽  
Design Methodology ◽  
Management Policy ◽  
Seasonal Patterns ◽  
Content Type ◽  
Rhythmic Behavior ◽  
Direct Competition ◽  
Information Metric ◽  
Fierce Competition ◽  
Practical Implications

Purpose This paper aims to examine the question of whether commercial, peer-to-peer accommodation platforms (Airbnb, in particular) and hotels are in fierce competition with each other with the possible presence of substitution threats, and compares the time series of the occupancy values across two supplier types. Design/methodology/approach The cities of Milan and Rome are used as case studies for this analysis. To assess the extent of synchronization, the series of Airbnb and hotels are transformed into a series of symbols that render their rhythmic behavior, and a mutual information metric is used to measure the effect. Findings The results show that Airbnb hosts and hotels have different seasonal patterns. The diverse occupancy trends support the absence of direct competition between Airbnb and hotels. The findings are consistent in the two analyzed cities (Milan and Rome). Interestingly, there are higher similarities between seasonal occupancy series of Airbnb listings in Milan and Rome, on one side, and hotels in Milan and Rome, on the other, than between Airbnb and hotels in the same city. Research limitations/implications The findings show a progressive de-synchronization (within mutual information) among the five groups of Airbnb hosts triggered by the rising professionalization degree. This result suggests the existence of a partial different business model for multi-listing hosts. Practical implications The study illustrates an absence of any substitution threat between Airbnb and hotels in both cities. This could have important consequences, especially for the pricing and revenue management policy. In fact, the higher the substitution threat, the higher the attention that Airbnb entrepreneurs should pay to the pricing strategy implemented by hotels, and vice versa. Originality/value This study sheds new light on the competition threat between Airbnb and hotels. In this study, hotels and Airbnb hosts appear as two very separate markets.

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