TRADE SIZE CLUSTERING IN THE E‐MINI INDEX FUTURES MARKETS

• Date: 01 September 2016
• DOI: http://doi.org/10.1111/jfir.12097
• Published date: 01 September 2016

TRADE SIZE CLUSTERING IN THE E-MINI INDEX FUTURES MARKETS

Qin Wang and Jun Zhang

Oklahoma State University

Abstract

We compare trade size clustering of morning, afternoon, and after-hours trades in both

the E-mini S&P 500 and E-mini NASDAQ-100 futures markets. Morning and afternoon

volatility is higher than after-hours volatility. Morning and afternoon trades cluster more

at round sizes than do after-hours trades, and morning and afternoon trades cluster more

on days with macroeconomic announcements than without announcements. Taken

together, our results are consistent with the prior literature that trade size clustering

increases with volatility.

JEL Classification: G10, G20

I. Introduction

Our study investigates the trade size clustering of morning, afternoon, and after-hours

trades in the E-mini S&P 500 and E-mini NASDAQ-100 futures markets. In our sample

period from November 1, 2014 to October 31, 2015, U.S. macroeconomic announce-

ments occur by 5:00 p.m. EST. This potentially creates substantial volatility in the futures

markets during the day. It would be interesting to examine how volatility influences trade

size clustering in the E-mini futures markets. However, there is no investigation

comparing trade size clustering of morning, afternoon, and after-hours trades in the fast-

growing E-mini futures markets. We believe it is important to fill this gap to increase our

understanding about how trade size clustering changes for different levels of volatility in

the E-mini futures markets.

Our study aims to answer this question by analyzing the E-mini S&P 500 and

E-mini NASDAQ-100 futures trades from November 1, 2014 to October 31, 2015. We

first document that both morning and afternoon realized volatility is higher than after-

hours realized volatility in the E-mini futures markets. We then find that both morning

and afternoon futures trades cluster more at round sizes than do after-hours futures trades.

In addition, we find that both morning and afternoon futures trades cluster more at round

sizes on days with at least one macroeconomic news announcement than without

macroeconomic news announcements.

We thank Robert A. Van Ness (the associate editor and referee) for highly constructive and valuable

comments and suggestions throughout the review process. We also thank the editors for helpful suggestions and

Pritam Saha for collecting the macroeconomic announcements data. We are responsible for any remaining errors

and omissions.

The Journal of Financial Research Vol. XXXIX, No. 3 Pages 247–261 Fall 2016

247

© 2016 The Southern Finance Association and the Southwestern Finance Association

RAWLS COLLEGE OF BUSINESS, TEXAS TECH UNIVERSITY

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