LIFFE cycles: intraday evidence from the FTSE-100 Stock Index futures market

We use a data set consisting of a complete history of all transactions and quotes to examine intraday patterns in trading volume, volatility and the quoted bid-ask spread in the market for FTSE-100 index futures. We document a number of regularities in the pattern of daily returns and volatility of the cash index. We also document intraday patterns in the basis, i.e. the contemporaneous difference between the futures price and the underlying cash index level. In general, we find returns vary over the day, reflecting in particular the influence of the US market openings in early afternoon London-time. We find that, while both volume and volatility exhibit a U-shaped pattern over the day, movements in the spread tend if anything to follow the opposite pattern. As far as consistency with microstructure models is concerned, our results are more supportive of the Brock and Kleidon model than the Admati and Pfleiderer model