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Three essays on benchmarks, derivatives and OTC markets

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posted on 2022-03-28, 21:35 authored by Tom Steffen
This dissertation consists of three empirical studies. Collectively, the chapters cover over the-counter(OTC) markets and assess the interactions with centralized exchange-traded markets via benchmarks and financial derivatives. Chapter 1, "The impact of commodity benchmarks on derivatives markets: The case of the Dated Brent assessment and Brent futures", examines the response of the futures market to the key spot oil benchmark assessed and published by Platts. Futures trading activity intensifies during the assessment window and aligns with the direction of the upcoming benchmark publication. A substantially increased arrival rate of informed traders suggests that sophisticated traders induce the futures price run-up ahead of the Dated Brent assessment ending point. The general increase in the arrival rates of both informed and uninformed traders during the assessment window underscores the benchmark's significance as a critical financial market infrastructure element. Chapter 2, "Skin in the game: Resource proximity and price impact", exploits a novel dataset incorporating OTC oil forward trading with exchange-traded futures activity to investigate the intricate interactions between both markets. I confirm that the futures market is the uncontested information leader, but that the forward market contributes a non-negligible proportion to the determination of the efficient oil price. Further, I find that fundamental supply and demand information, likely gained through 'skin in the game' in upstream and downstream oil infrastructure, proxied by the traders' centrality in the forward market, is revealed to the futures market by their forward trading activity. Chapter 3, "The visible hand: Benchmarks, regulation, and liquidity", suggests that a more precise assessment of the OTC interest rate swap benchmark can enhance welfare by improving the traders' ability to monitor the dealers. The transition from the unregulated submission-based ISDAFIX regime to the more transparent and regulated market-based ICE Swap Rate regime provides a natural experiment for testing this proposition empirically. Utilizing proprietary electronic order book data for USD interest rate swaps, I confirm that liquidity in the underlying swaps, affected by the regime switch, improves significantly more vis-à-vis swaps not impacted by the change in assessment procedure.


Alternative Title

3 essays on benchmarks, derivatives and OTC markets

Table of Contents

0. Introduction -- 1. The impact of commodity benchmarks on derivative markets: the case of the dated Brent assessment and Brent futures -- 2. Skin in the game: resource proximity and price impact -- 3. The visible hand: benchmarks, regulation and liquidity -- 4. Conclusion -- Appendix.


Bibliography: pages 184-200 Thesis by publication. A cotutelle thesis with the University of Edinburgh.

Awarding Institution

Macquarie University

Degree Type

Thesis PhD


PhD, Macquarie University, Macquarie Graduate School of Management

Department, Centre or School

Macquarie Graduate School of Management

Year of Award


Principal Supervisor

Vito Mollica


Copyright Tom Steffen 2018 Copyright disclaimer:




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