Risk.net article – Crossed signals: row over collusion pits scholars against traders
Feb 6, 2025
An Oxford study claims to show evidence of collusion in ETF markets. Some traders give it short shrift.
By Luke Clancy and Mauro Cesa
Academics at the University of Oxford claim market-makers use coded signals to identify themselves to peers. The researchers found that ETF market-makers on Euronext’s Amsterdam exchange often submit unusually large orders that end in the same two trailing digits and rarely trade against each other.
Market-makers say they use trailing digits to track their own orders - and not as a signal to others. Larger order sizes may be used to gain queue priority and qualify for the incentive schemes of exchanges, traders say.
The Oxford academics find these explanations unconvincing. Traders say the scholars "fundamentally misunderstand" the activities of marketmakers.