The behavior of bid-ask spreads in the electronically-traded corn futures market

Xiaoyang Wang, Philip Garcia, Scott H. Irwin

Research output: Contribution to journalArticlepeer-review


This is the first paper to analyze liquidity costs in agricultural futures markets based on the observed bid-ask spread (BAS) faced by market participants. The results reveal a highly liquid corn market that mostly offers order execution at minimum cost. The BAS responds negatively to volume and positively to price volatility, but also affects volume traded and price volatility. While statistically significant, these responses on a cents/bushel or a percentage basis are generally small. Liquidity costs are also virtually impervious to short-term changes in demand for spreading and trend-following trader activity, as well as differences from day-of-the-week changes in market activity. Much larger cents/bushel and percentage changes in BAS occur during commodity index trader roll periods and on USDA report release days. The roll period findings indicate a sunshine trading effect, while announcement effects identify the importance of unexpected information and adverse selection on order execution costs. Overall, our research demonstrates that the transition to electronic trading in the corn futures market has led to low and stable liquidity costs, despite the market turbulence in 2008-2009.

Original languageEnglish (US)
Pages (from-to)557-577
Number of pages21
JournalAmerican Journal of Agricultural Economics
Issue number2
StatePublished - Mar 2014


  • USDA reports
  • commodity index funds
  • electronic corn futures market
  • liquidity costs
  • observed bid-ask spread

ASJC Scopus subject areas

  • Agricultural and Biological Sciences (miscellaneous)
  • Economics and Econometrics


Dive into the research topics of 'The behavior of bid-ask spreads in the electronically-traded corn futures market'. Together they form a unique fingerprint.

Cite this