Work

Internationalization: The impact of commodity futures market expansion on market quality

Year: 2025

Type: article

Abstract: We examine the impact of the Securities and Exchange Board of India’s (SEBI) September 2022 regulation on market quality that allowed Foreign Portfolio Investors (FPIs) to participate in selected commodity futures contracts. We analyze all active commodity futures contracts traded at the Multi Commodity Exchange (MCX), the leading commodity derivatives exchange in India. In this natural experiment, we implement a difference-in-differences approach and find that post-regulation liquidity in commodity futures increases significantly, with no adverse impact on volatility. The results are robust after controlling for lagged volume, contract value, time to maturity, and spot volatility. Furthermore, several placebo tests confirm the robustness of our findings.

Source: Pacific-Basin Finance Journal

DOI: 10.1016/j.pacfin.2025.102934

Authors: Vivek Rajvanshi, Gouri Sankar Sahoo, Avijit Bansal

Institution: Indian Institute of Management Calcutta

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,090

Funder: Indian Institute of Management Calcutta