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

133 Pages Posted: 20 Sep 2000  

Charles Goodhart

London School of Economics & Political Science (LSE) - Financial Markets Group

Takatoshi Ito

University of Tokyo - Faculty of Economics; National Bureau of Economic Research (NBER); Ministry of Finance, Tokyo

Richard Payne

City University London - Sir John Cass Business School

Date Written: April 1995

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

Goodhart, Charles and Ito, Takatoshi and Payne, Richard, One Day in June, 1994: A Study of the Working of Reuters 2000-2 Electronic Foreign Exchange Trading System (April 1995). NBER Working Paper No. t0179. Available at SSRN: https://ssrn.com/abstract=225089

Charles A.E. Goodhart (Contact Author)

London School of Economics & Political Science (LSE) - Financial Markets Group ( email )

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Takatoshi Ito

University of Tokyo - Faculty of Economics ( email )

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Tokyo 113-0033
Japan

National Bureau of Economic Research (NBER) ( email )

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Ministry of Finance, Tokyo ( email )

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Japan
+81-3-3581-4720 (Phone)
+81-3-5251-2144 (Fax)

Richard G. Payne

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

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