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

Author

Listed:
  • 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.

Suggested Citation

  • Charles Goodhart & Takatoshi Ito & Richard Payne, 1995. "One Day in June, 1994: A Study of the Working of Reuters 2000-2 Electronic Foreign Exchange Trading System," NBER Technical Working Papers 0179, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberte:0179
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    References listed on IDEAS

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    Cited by:

    1. Alexander Mende, 2006. "09/11 on the USD/EUR foreign exchange market," Applied Financial Economics, Taylor & Francis Journals, vol. 16(3), pages 213-222.
    2. Martin D. D. Evans(Georgetown University and NBER), 2005. "What are the Origins of Foreign Exchange Movements?," Working Papers gueconwpa~05-05-06, Georgetown University, Department of Economics.
    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. Áron Gereben & György Gyomai & Norbert Kiss M., 2005. "The microstructure approach to exchange rates: a survey from a central bank’s viewpoint," MNB Occasional Papers 2005/42, Magyar Nemzeti Bank (Central Bank of Hungary).
    5. 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, vol. 58(5), pages 1791-1820, October.

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    JEL classification:

    • F3 - International Economics - - International Finance
    • G2 - Financial Economics - - Financial Institutions and Services

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