Abstract
We use the 2008 short-selling ban to examine the impact of single-stock futures (SSFs) trading on options market quality. We show that there is a substitution effect between options trading and SSFs trading during the ban period. In addition, our results show that SSFs trading had a significant effect in narrowing the bid-ask spreads of options contracts. Moreover, compared to stocks without SSFs, stocks with SSFs were less likely to violate put-call parity during the ban period. Our results suggest that SSFs trading helps mitigate the negative effect of the short-selling ban on options market quality documented in the literature.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 1398-1419 |
| Number of pages | 22 |
| Journal | Journal of Futures Markets |
| Volume | 40 |
| Issue number | 9 |
| DOIs | |
| State | Published - Sep 1 2020 |
Bibliographical note
Publisher Copyright:© 2020 Wiley Periodicals LLC
Keywords
- financial crisis
- options market quality
- short-selling ban
- single-stock futures
