Foreign Exchange Liquidity in the Americas

61 Pages Posted: 28 Mar 2017

See all articles by Susan McLaughlin

Susan McLaughlin

Federal Reserve Banks - Federal Reserve Bank of New York

Date Written: March 2017

Abstract

This report discusses FX liquidity metrics and their drivers, reaching four conclusions. First, changes in FX markets have reduced the usefulness of some conventional FX liquidity metrics; several metrics need to be assessed together to give a better picture of market liquidity. Second, some metrics suggest that liquidity in FX markets has declined during some recent episodes of market stress. Third, technology appears to have changed liquidity dynamics - enhancing liquidity in normal conditions and offsetting the impact of market fragmentation, but also adding to FX volatility in stressed market conditions. Fourth, the impact of post-crisis regulatory change on FX market liquidity remains unclear and requires further study.

JEL Classification: F31, G15

Suggested Citation

McLaughlin, Susan, Foreign Exchange Liquidity in the Americas (March 2017). BIS Paper No. 90. Available at SSRN: https://ssrn.com/abstract=2932403

Susan McLaughlin (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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