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The Traditional Brokers: What are their Chances in the Forex?

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  • Paula C. Albuquerque

    ()
    (Technical University of Lisbon)

Abstract

The electronic brokers compete with the traditional brokers. The electronic brokers offer lower costs, increased speed and a better guarantee of transparency and of anonymity. The only real advantage of the traditional brokers is the gathering of information. We investigate whether the traders in the foreign exchange market consider that to be crucial, which is equivalent to asking “Do traditional brokers have any chance in the forex?” We build a simple model and use the results of a questionnaire that we elaborated and that was sent to the users of the brokers’ services in the Portuguese foreign exchange market. We also use transaction data from the most important dealer in the Portuguese market. Considering this dealer to be representative, we conclude that the main advantage of the traditional broker is not much valued by the dealers. This does not leave a promising future for the traditional broker.

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File URL: http://www.cema.edu.ar/publicaciones/download/volume6/albuquerque.pdf
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Bibliographic Info

Article provided by Universidad del CEMA in its journal Journal of Applied Economics.

Volume (Year): VI (2003)
Issue (Month): (November)
Pages: 205-220

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Handle: RePEc:cem:jaecon:v:6:y:2003:n:2:p:205-220

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Related research

Keywords: brokers; foreign exchange market; information;

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  1. Forster, Margaret M. & George, Thomas J., 1992. "Anonymity in securities markets," Journal of Financial Intermediation, Elsevier, vol. 2(2), pages 168-206, June.
  2. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
  3. Hartmann, Philipp & Manna, Michele & Manzanares, Andrés, 2001. "The microstructure of the euro money market," Working Paper Series 0080, European Central Bank.
  4. Domowitz, Ian, 1993. "A taxonomy of automated trade execution systems," Journal of International Money and Finance, Elsevier, vol. 12(6), pages 607-631, December.
  5. Harris, L., 1990. "Liquidity , Trading Rules and Electronic Trading Systems ," Papers 91-8, Southern California - School of Business Administration.
  6. Madhavan, A., 1991. "Security Prices and Market Transparency," Weiss Center Working Papers 1-92, Wharton School - Weiss Center for International Financial Research.
  7. Fortin, Pierre & Keil, Manfred & Symons, James, 2001. "The Sources of Unemployment in Canada, 1967-91: Evidence from a Panel of Regions and Demographic Groups," Oxford Economic Papers, Oxford University Press, vol. 53(1), pages 67-93, January.
  8. Admati, Anat R & Pfleiderer, Paul, 1991. "Sunshine Trading and Financial Market Equilibrium," Review of Financial Studies, Society for Financial Studies, vol. 4(3), pages 443-81.
  9. McCloskey, Donald & Klamer, Arjo, 1995. "One Quarter of GDP Is Persuasion," American Economic Review, American Economic Association, vol. 85(2), pages 191-95, May.
  10. Ian Domowitz, 1992. "Automating the Price Discovery Process - Some International Comparisons and Regulatory Implications," IMF Working Papers 92/80, International Monetary Fund.
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