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Market structure and inefficiency in the foreign exchange market

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  • Mark D. Flood

Abstract

This paper investigates the intradaily operational efficiency of the U. S. foreign exchange market by conducting computer simulation experiments with market structure (the numbers of market?makers, brokers and customers). The results indicate significant operational inefficiencies which can be explained by temporary inventory imbalances inherent in a decentralized market. The results also suggest that much of this inefficiency could be alleviated through a centralization of price information.

Suggested Citation

  • Mark D. Flood, 1993. "Market structure and inefficiency in the foreign exchange market," Working Papers 1991-001, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:1991-001
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    References listed on IDEAS

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    Keywords

    Foreign exchange;

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