Volume 15 | Issue 3 | Article 1
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Multi-Market Trading of Gold Futures
On October 4, 2004, the Chicago Board of Trade introduced the electronic full-size gold futures contract that complements the CBOT’s established mini-size electronic gold futures contract and is in direct competition to the New York Mercantile Exchange’s COMEX full-size gold futures contract, which is sold mainly through open outcry. Although the COMEX contract initially provides better market quality for the trading of gold futures contracts, over the 22-month period of our study the favorable market quality conditions transfer to the CBOT full-size contract. We find price discovery migration is influenced by market share and transaction costs. By August 2006, the CBOT full-size contract has the highest volume, the lowest effective spread, and contributes the most to price discovery. Investors in the gold futures market prefer to trade full-size contracts electronically.
