Informed Trading and Price Discovery Around the Clock

Abstract

This article examines intraday patterns of volume, volatility, informed trading, and price discovery in actively traded Eurodollar (ED) futures contracts exchanged on the Chicago Mercantile Exchange’s (CME) Globex electronic transaction platform between January 3, 2005, and December 29, 2006. This period immediately follows the full integration of Globex into this market. On an hourly basis—and within four distinct intraday periods—the author observes notable intraday market patterns in volume, volatility, informed trading, and price discovery in this around-the-clock setting. Traders have nearly continuous access to this market, and information fundamental to the pricing of Eurodollar futures contracts can materialize at any time of the day. Yet, the vast majority of informed trading and price discovery in this market continues to occur during historical regularly scheduled trading hours, when volume and volatility are highest.