The daily trading limits do not affect the efficiency of the market much because the commodity exchanges place very broad limitations on maximum daily price movements.

Question

Quizplus · Accepted Answer

These daily trading limits obviously must affect the efficiency of the market somewhat. If market conditions indicate that the price of wheat should decline by $0.70 and the daily limit is $0.60, then obviously the price of wheat is not in equilibrium as it opens the following morning. However, the desire to stop market panics tends to override the desire for total market efficiency in the commodity markets.

The Daily Trading Limits Do Not Affect the Efficiency of the Market