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" Trading Mechanisms in Commodities Markets "
Calamia, Anna
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Latin Dissertation
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| Record Number
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1097107
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| Doc. No
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TLets498123
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| Main Entry
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Calamia, Anna
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| Title & Author
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Trading Mechanisms in Commodities Markets\ Calamia, Anna
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| College
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London School of Economics and Political Science (University of London)
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| Date
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2007
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| student score
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2007
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| Degree
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Ph.D.
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| Abstract
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We investigate the contribution of microstructural factors in the formation ofcommodities prices, using a completely new set of intra-daily data from the LondonMetal Exchange (LME). We chose the LME because its interesting structure allowsthe comparison of three alternative trading mechanisms: (i) The Inter-Office telephonemarket; (ii) Two daily sessions of floor market; (iii) The electronic tradingplatform (since 2001).The thesis begins with a review of the literature on market microstructure (Chapter1), followed by a detailed description of the structure of the LME (Chapter 2).We then move to the empirical evidence from the LME. We first focus on thecomparison of decentralized and floor trading systems (Chapter 3). For this purpose,we use a data set relative to the period February - April 2000, before theintroduction of the electronic system. We find that the trading mechanism affectsvolume, volatility, spreads, price discovery and metals relationships.We investigate the robustness of these results, in a different period: February- May 2006 (Chapter 4). Since October 2000, there has been an extension of thefloor's opening times: we find that this has an impact on market variables. We alsocompare the traditional and electronic market, LME Select, launched in February2001 (followed by an updated version in 2003). We find that there is more tradingactivity and price discovery on LME Select, but LME Rings still concentrate a largeamount of trades, and spreads are smaller. As a consequence of these structuralchanges, overall trading activity has increased since 2000, and spreads have lowered.In the final Chapter (Chapter 5), we model a computer-simulated environmentto investigate the impact of trading mechanisms from a different angle. The resultsconfirm the empirical findings that price properties are affected by the tradingsystem.
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| Added Entry
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London School of Economics and Political Science (University of London)
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