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Assessing the Price Impact of Treasury Market Workups

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Abstract

The price impact of a trade derives largely from its information content. The “workup” mechanism, a trading protocol used in the U.S. Treasury securities market, is designed to mitigate the instantaneous price impact of a trade by allowing market participants to trade additional quantities of a security after a buyer and seller first agree on its price. Nevertheless, workup trades are not necessarily free of information. In this post, we assess the role of workups in price discovery, following our recent paper in the Review of Asset Pricing Studies (an earlier version of which was released as a New York Fed staff report).

Suggested Citation

  • Michael J. Fleming & Giang Nguyen, 2019. "Assessing the Price Impact of Treasury Market Workups," Liberty Street Economics 20190306c, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:87319
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    Cited by:

    1. James Collin Harkrader & Michael Puglia, 2020. "Price Discovery in the U.S. Treasury Cash Market: On Principal Trading Firms and Dealers," Finance and Economics Discussion Series 2020-096, Board of Governors of the Federal Reserve System (U.S.).

    More about this item

    Keywords

    Workup; size discovery; Treasury market; information share; price impact;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets

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