Liquidity withdrawal in the FX spot market: A cross-country study using high-frequency data

Alexis Stenfors and Masayuki Susai

Journal of International Financial Markets, Institutions and Money, 2019, vol. 59, issue C, 36-57

Abstract: This paper studies short-term liquidity withdrawal in the FX spot market for eight currency pairs. We include over 3 million limit order submissions, worth more than $5 trillion, and investigate the drivers of two different measures of volume-based liquidity. Overall, we find that market participants react differently to changes in the state of the market for different currency pairs. Moreover, the liquidity withdrawal process also differs depending on the perceived information content of new limit orders submitted. Finally, we document that a ‘liquidity illusion’ might exist in FX spot markets electronic trading platforms where algorithmic and high-frequency trading is prominent.

Keywords: Algorithmic trading; Foreign exchange; High-frequency trading; Limit order book; Liquidity; Market microstructure (search for similar items in EconPapers)
JEL-codes: D4 F3 G15 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S104244311830444X
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Liquidity Withdrawal in the FX Spot Market: A Cross-Country Study Using High-Frequency Data (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:59:y:2019:i:c:p:36-57

DOI: 10.1016/j.intfin.2018.11.010

Access Statistics for this article

Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely

More articles in Journal of International Financial Markets, Institutions and Money from Elsevier
Bibliographic data for series maintained by Catherine Liu ().