Abstract
We study prices, liquidity, and individual account trading activity around large and predictable ETF
“roll” trades in crude oil futures markets to test the implications of the competing theories of predatory
and sunshine trading. The results indicate narrower bid-ask spreads, greater limit order book depth, and
a larger number of distinct trading accounts providing liquidity on roll versus non-roll dates. We also
extend the theory of strategic trading ahead of a known liquidation to show that even a monopolist trader
has incentives to effectively provide liquidity rather than follow predatory strategies in a “resilient”
market. We estimate that ETFs effectively pay about 30 basis points to complete their roll trades. On
balance, the evidence supports the implications of the sunshine trading theories and of our modified
theory of strategic trading around a known liquidation, and fail to support the implications of predatory
trading models.