Investigating the Impact of Margin Changes on Future Trading Activities of Gold Coin in Iran Mercantile Exchange

Abstract

This paper investigates the effects of margin changes on trading volume and open interest of Bahar-e-Azadi gold coin future contracts in Iran Mercantile Exchange (IME). The estimation method in this research is Ordinary Least Squares (OLS) technique simply. An approach was used in which margin changes effect on trading activities through opportunity cost and transaction cost. For this purpose, time series data of three successive maturities were used as first maturity, second maturity and third maturity. The results show that there is a positive significant relationship between margin changes and trading volume for all three maturities, while there is no significant relationship between margin changes and open interest. Therefore, according to findings, margin changes cannot decrease trading activities through increasing opportunity and transaction costs. So, if our purpose of reducing the margin is to decrease in trading volume and affect open interest, according to the research finding, it cannot act as an appropriate tool.

Keywords

• Margin
• Volume trading
• Open interest
• Opportunity cost
• Transaction costs