An estimation of liquidity effects of market microstructure changes in the Indian agricultural commodity market

Abstract

The effects of market microstructure change on the liquidity of the Indian agricultural commodity market are examined using 18 years of data by dividing it into different sub-samples. The study examines variations in market liquidity by conducting a year-wise analysis, followed by a pre-and post-veto analysis to investigate the changes in market liquidity caused by the irregular veto of commodities from futures trading. The study employed a pre- and post-amendment analysis to measure the outcomes of market regulation changes. The study employed different low-frequency proxies and log-linear regression models. This study confirms that market microstructure alterations did not significantly improve market liquidity and quality. The study has implications for the government because it examines the effects of market reforms on market quality, Furthermore, the study has effects on market players since it deals with the liquidity of different commodities on which they can take investment decisions.