High hedging costs hindering futures market growth, Amsterdam Exchange study finds.
The article examines how order imbalances affect price paths in futures markets, focusing on the Amsterdam Agricultural Futures Exchange. By analyzing market depth, researchers found that low market depth leads to high hedging costs, hindering contract volume growth. A two-dimensional market depth measure was developed to help manage market depth and reduce risk for hedgers. The study's findings demonstrate how understanding market depth can improve futures exchanges and benefit hedgers.