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Price Formation on the EuroMTS Platform

Author

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  • Guglielmo Maria Caporale
  • Alessandro Girardi

Abstract

This paper examines the process of price discovery in the MTS system, which builds on the parallel quoting of euro-denominated government securities on a number of (relatively large) domestic markets and on a (relatively small) European marketplace (EuroMTS). Using twenty-seven months of daily data for 107 pairs of bonds, we present unambiguous evidence that trades on EuroMTS have a sizeable informational content.

Suggested Citation

  • Guglielmo Maria Caporale & Alessandro Girardi, 2010. "Price Formation on the EuroMTS Platform," Discussion Papers of DIW Berlin 977, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp977
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.347265.de/dp977.pdf
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    Cited by:

    1. Caporale, Guglielmo Maria & Girardi, Alessandro & Paesani, Paolo, 2012. "Quoted spreads and trade imbalance dynamics in the European Treasury bond market," The Quarterly Review of Economics and Finance, Elsevier, vol. 52(2), pages 173-182.
    2. Daragh Clancy & Peter G. Dunne & Pasquale Filiani, 2019. "Liquidity and tail-risk interdependencies in the euro area sovereign bond market," Working Papers 41, European Stability Mechanism.
    3. Caporale, Guglielmo Maria & Girardi, Alessandro, 2013. "Price discovery and trade fragmentation in a multi-market environment: Evidence from the MTS system," Journal of Banking & Finance, Elsevier, vol. 37(2), pages 227-240.
    4. Andrea Coppola & Alessandro Girardi & Gustavo Piga, 2013. "Overcrowding Versus Liquidity In The Euro Sovereign Bond Markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 18(4), pages 307-318, October.
    5. Pelizzon, Loriana & Subrahmanyam, Marti G. & Tomio, Davide & Uno, Jun, 2015. "Sovereign credit risk, liquidity, and ECB intervention: Deus ex machina?," SAFE Working Paper Series 95, Leibniz Institute for Financial Research SAFE.
    6. Eisl, Alexander & Ochs, Christian & Staghøj, Jonas & Subrahmanyam, Marti G., 2022. "Sovereign issuers, incentives and liquidity: The case of the Danish sovereign bond market," Journal of Banking & Finance, Elsevier, vol. 140(C).
    7. Schneider, Michael & Lillo, Fabrizio & Pelizzon, Loriana, 2016. "How has sovereign bond market liquidity changed? An illiquidity spillover analysis," SAFE Working Paper Series 151, Leibniz Institute for Financial Research SAFE.

    More about this item

    Keywords

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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