Commodity financialization and electronification: evidence from high-frequency data

Lauter, T., Prokopczuk, M. and Trück, S. (2026) Commodity financialization and electronification: evidence from high-frequency data. Review of derivatives research, 29. 15. ISSN 1573-7144 doi: 10.1007/s11147-026-09235-w

Abstract/Summary

In this paper, we study the evolution of intraday market quality in a broad cross-section of commodity futures markets from 1996 to 2025, a period characterized by significant structural changes. The influx of passive index investors, the transition from floor trading to automated electronic limit order markets, and the increasing presence of informed financial investors fundamentally reshaped trading dynamics. We find an improvement in intraday market quality following these changes between 2004 and 2014. Electronic trading reduced effective spreads by approximately one-third, significantly improving liquidity. Other enhancements in market quality can be attributed to changes in trader composition. While market quality during index roll and after the index addition of soybean meal has increased slightly, the overall improvements in intraday price efficiency appear to be driven by informed financial traders.

Item Type	Article
URI	https://centaur.reading.ac.uk/id/eprint/130853
Identification Number/DOI	10.1007/s11147-026-09235-w
Refereed	Yes
Divisions	Henley Business School > Finance and Accounting
Publisher	Springer
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