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Federal Reserve Bank of New York
Staff Reports
The microstructure of a U.S. Treasury ECN: the BrokerTec platform
Michael J. Fleming
Bruce Mizrach
Giang Nguyen

We assess the microstructure of the U.S. Treasury securities market following its migration to electronic trading. We model price discovery using a vector autoregression model of price and order flow. We show that both trades and limit orders affect price dynamics, suggesting that traders also choose limit orders to exploit their information. Moreover, while limit orders have smaller price impact, their greater variation contributes more to the variance of price updates. Lastly, we find increased price impact of trades and especially limit orders following major announcements (such as FOMC rate decisions and macroeconomic data releases), suggesting that the private information derived from public information is disproportionally exploited through limit orders.

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Michael J. Fleming & Bruce Mizrach & Giang Nguyen, The microstructure of a U.S. Treasury ECN: the BrokerTec platform, Federal Reserve Bank of New York, Staff Reports 381, 2009, revised 01 Mar 2017.
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Keywords: microstructure; Treasury market; bid-ask spread; price impact; information
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