Abstract
We showhowtrading protocols impede the price discovery process in single stock futures as implicit trade costs outweigh explicit costs. Despite the trade volume dominance, trade and leverage cost efficiency, the futures market accounts for only 35% of the price discovery vis-a-vis the spot market. Specifically, futures market’s informational efficiency is adversely affected by market frictions in the formof market wide position limits, minimum contract values and margin requirements.
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