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One Day in June, 1994: A Study of the Working of Reuters 2000-2 Electronic Foreign Exchange Trading System

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  • Charles Goodhart
  • Takatoshi Ito
  • Richard Payne

Abstract

The paper utilized foreign exchange data (bid, ask and transaction prices and quantities) collected from the screen of the electronic broking system (Reuter D2000-2) on June 16, 1993. The bid and ask quotes, which are `firm' in this data set, are compared with the Reuters FXFX page, which reports only indicative bid and ask prices. A caution is necessary due to its small samples (7 hours). The paper finds that although the bid-ask mean of indicative quotes is similar to that of `firm' quotes, the behavior of bid-ask spread and the frequency of quote entry are quite different in the two kinds of quotes. The bid-ask spreads in the broking system are much more time- variant and dependent on the frequency of trade, while the indicative bid-ask spreads tend to cluster at round numbers.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Technical Working Papers with number 0179.

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Date of creation: Apr 1995
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Publication status: published as Frankel, Jeffrey A., Giampaolo Galli and Alberto Giovannini (eds.) The Microstructure of Foreign Exchange Markets. Chicago: University of Chicago Press, 1996.
Handle: RePEc:nbr:nberte:0179

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Cited by:
  1. Martin D. D. Evans(Georgetown University and NBER), 2005. "What are the Origins of Foreign Exchange Movements?," Working Papers, Georgetown University, Department of Economics gueconwpa~05-05-06, Georgetown University, Department of Economics.
  2. Mende, Alexander, 2005. "09/11 on the USD/EUR Foreign Exchange Market," Hannover Economic Papers (HEP), Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät dp-312, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  3. Yuko Hashimoto & Takatoshi Ito & Takaaki Ohnishi & Misako Takayasu & Hideki Takayasu & Tsutomu Watanabe, 2008. "Random Walk or A Run: Market Microstructure Analysis of the Foreign Exchange Rate Movements based on Conditional Probability," NBER Working Papers 14160, National Bureau of Economic Research, Inc.
  4. Carol L. Osler, 2003. "Currency Orders and Exchange Rate Dynamics: An Explanation for the Predictive Success of Technical Analysis," Journal of Finance, American Finance Association, American Finance Association, vol. 58(5), pages 1791-1820, October.

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