Price impact of block trades: the curious case of downstairs trading in the EU emissions futures market

Andros Gregoriou, Gbenga Ibikunle, Naresh Pandit

Research output: Contribution to journalArticle

Abstract

Using high-frequency data from the European Climate Exchange (ECX), we examine the determinants of price impact of ¤21 billion worth of block trades during 2008–2011 in the European carbon market. We find that wider bid-ask spreads and volatility are characterised by a smaller price impact. Larger levels of price impact are more likely to occur during the middle of the trading day, specifically the four-hour period between 11 a.m. and 3 p.m., than during the first or final hours. Purchase block trades induce a relatively smaller price impact on price run-up, while sell block trades exhibit a larger price impact on price run-up. We conclude that block trades on the ECX induce less price impact than in equity or conventional futures markets, and that a significant proportion of the effects contradict findings on block trades in those markets; thus, we provide the first evidence of the curious bent to block trading in the European Union emissions trading scheme.
Original languageEnglish
JournalEuropean Journal of Finance
Volume22
Issue number2
DOIs
Publication statusPublished - 21 Jul 2014

Keywords

  • carbon futures
  • block trades
  • price impact
  • high-frequency trades
  • European Union emissions trading scheme (EU-ETS)
  • determinants
  • liquidity

Fingerprint Dive into the research topics of 'Price impact of block trades: the curious case of downstairs trading in the EU emissions futures market'. Together they form a unique fingerprint.

  • Cite this