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Working Paper
Competing for order flow in OTC markets
The authors develop a model of a two-sided asset market in which trades are intermediated by dealers and are bilateral. Dealers compete to attract order flow by posting the terms at which they execute trades, which can include prices, quantities, and execution times, and investors direct their orders toward dealers that offer the most attractive terms of trade. Equilibrium outcomes have the following properties. First, investors face a trade-off between trading costs and speeds of execution. Second, the asset market is endogenously segmented in the sense that investors with different asset ...
Discussion Paper
U.S. Treasury Market Action on Election Night 2016
As the midterm elections approach, it’s worth revisiting the striking financial market response to the last federal elections in 2016. U.S. equity market futures and Treasury yields first plunged on election night 2016, as the presidential election results turned out closer than expected, but quickly rebounded after President Trump’s victory became clear, ultimately ending the day higher. In this post, I take a close look at the unusual U.S. Treasury market behavior that night, focusing on the market conditions and trading flows amid which the sharp yield changes took place.
Working Paper
Order Flow and Exchange Rate Dynamics in Electronic Brokerage System Data
We analyze the association between order flow and exchange rates using a new dataset representing a majority of global interdealer transactions in the two most-traded currency pairs. The data consist of six years (1999-2004) of order flow and exchange rate data for the euro-dollar and dollar-yen currency pairs at the one-minute frequency from EBS, the electronic broking system that now dominates interdealer spot trading in these currency pairs. This long span of high-frequency data allows us to gain new insights about the joint behavior of these series. We first confirm the presence of a ...