Information Shares in a Two-Tier FX Market

63 Pages Posted: 21 Sep 2016 Last revised: 6 Sep 2019

See all articles by Louis R. Piccotti

Louis R. Piccotti

Oklahoma State University - Stillwater - Spears School of Business

Ben Z. Schreiber

Bank of Israel; Bar Ilan University

Date Written: September 3, 2019

Abstract

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

Piccotti, Louis R. and Schreiber, Ben Z., Information Shares in a Two-Tier FX Market (September 3, 2019). Available at SSRN: https://ssrn.com/abstract=2841462 or http://dx.doi.org/10.2139/ssrn.2841462

Louis R. Piccotti (Contact Author)

Oklahoma State University - Stillwater - Spears School of Business ( email )

460 Business
Stillwater, OK 74078-0555
United States

Ben Z. Schreiber

Bank of Israel ( email )

P.O. Box 780
Jerusalem 91007
Israel
972-2-6552595 (Phone)
972-2-6512026 (Fax)

Bar Ilan University ( email )

Ramat Gan, 55000
Israel

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