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 smaller price impact. Larger levels of price impact are more likely to occur during the middle of the trading day than during the first or final hours. Purchase block trades induce relatively smaller price impact on price run-up, while sell block trades exhibit 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 EU Emissions Trading Scheme (EU-ETS).
Published Version
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