The mission of the Office of the Chief Economist (OCE) of the Commodity Futures Trading Commission (CFTC) is to conduct rigorous economic and econometric analysis of derivatives markets; to foster market transparency by disseminating its research to market participants and the general public; and to partner with other CFTC divisions and offices to integrate economic reasoning and data analysis into Commission policy and cost-benefit considerations.
A list of the current members of the Office of the Chief Economists can be found on our Biographies page, which includes backgrounds as well as research interests. The office is led by Scott Mixon (Acting Chief Economist).
High-Frequency Trading and Market Quality: Evidence from Account-Level Futures Data (John Coughlan, Alexei Orlov).
• We use rich regulatory data on intraday transactions and end-of-day positions of traders to examine how participation of high-frequency traders (HFTs) affects market quality.
• Panel estimation evidence shows that greater participation by HFTs is strongly associated with improvements in market quality, whereas higher rates of aggressive, directional trading produce an adverse, partially offsetting effect.
• While futures contracts are sensitive to market uncertainty, as measured by the VIX, they are even more sensitive to own price volatility.
• We take advantage of the 2015 change in CME's daily settlement methodology for agricultural commodities to address potential endogeneity using a fixed-effects difference-in-difference setup.
• Our results are robust to relying on alternative estimation techniques, using overly conservative (clustered) standard errors, modeling various forms of cross-sectional and temporal dependence, as well as studying each market separately.
For older research projects, please visit our Research Papers website.