Abstract
In mid-June 2002, the New York Mercantile Exchange (NYMEX) introduced E-mini futures contracts on natural gas and crude oil, a natural response to information technology developments and investor interest. The transition data allow examination of the effects of the new contracts on market quality and price discovery. Bid–ask spreads on the regular futures have been reduced significantly since introduction of the E-mini futures, showing improved market quality from competition effects. The E-mini market contributes more than 30% to the price discovery process, although it represents less than 1% of the volume of the regular futures with the same underlying. E-mini futures have several advantageous characteristics over regular futures, which should explain these significant results.
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