Information Shares in a Two-Tier FX Market
63 Pages Posted: 21 Sep 2016 Last revised: 6 Sep 2019
Date Written: September 3, 2019
Using several measures of information share, we examine price discovery across the inter-dealer and dealer-customer market tiers in the currencies market. In the spot market, the information share of the inter-dealer tier is higher than that of the dealer-customer one for non-financial sector trades and is lower than the dealer-customer tier for foreign investors’ sell trades. In the forward market, the dealer-customer tier generally has the greater information share at the dealer’s buy side. Our results indicate the market where customers’ trades are the most informative and demonstrate how exogenous events affect price discovery across markets and market tiers.
Keywords: forex microstructure, information share, price discovery
JEL Classification: G14, G15
Suggested Citation: Suggested Citation