On the sources of private information in FX markets

Michael Moore and Richard Payne ()

Journal of Banking & Finance, 2011, vol. 35, issue 5, 1250-1262

Abstract: We investigate the source of information advantage in inter-dealer FX trading using data on trades and counter-party identities. In liquid dollar exchange rates, information is concentrated among dealers that trade most frequently and specialize their activity in a particular rate. In cross-rates, traders that engage in triangular arbitrage are best informed. Better-informed traders are also located on larger trading floors. In cross-rates, the ability to forecast flows explains all of the advantage of the triangular arbitrageurs. In liquid dollar rates, specialist traders can forecast both order-flow and the component of exchange rate changes that is uncorrelated with flow.

Keywords: Market; microstructure; Exchange; rates; Private; information (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (30)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:35:y:2011:i:5:p:1250-1262

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