Judgement Day: algorithmic trading around the Swiss franc cap removal
Francis Breedon (),
Louisa Chen (),
Angelo Ranaldo () and
Nicholas Vause ()
Additional contact information
Louisa Chen: School of Business, Management and Economics, University of Sussex, Postal: School of Business, Management and Economics, University of Sussex
No 711, Bank of England working papers from Bank of England
A key issue raised by the rapid growth of computerised algorithmic trading is how it responds in extreme situations. Using data on foreign exchange orders and transactions that includes identification of algorithmic trading, we find that this type of trading contributed to the deterioration of market quality following the removal of the cap on the Swiss franc on 15 January 2015, which was an event that came as a complete surprise to market participants. In particular, we find that algorithmic traders withdrew liquidity and generated uninformative volatility in Swiss franc currency pairs, while human traders did the opposite. However, we find no evidence that algorithmic trading propagated these adverse effects on market quality to other currency pairs.
Keywords: Swiss franc; algorithmic trading; liquidity; volatility; price discovery; arbitrage opportunities (search for similar items in EconPapers)
JEL-codes: G14 G23 (search for similar items in EconPapers)
Pages: 30 pages
New Economics Papers: this item is included in nep-mst
References: Add references at CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed
Downloads: (external link)
https://www.bankofengland.co.uk/-/media/boe/files/ ... ranc-cap-removal.pdf Full text (application/pdf)
Journal Article: Judgment day: Algorithmic trading around the Swiss franc cap removal (2023)
Working Paper: Judgment Day: Algorithmic Trading Around The Swiss Franc Cap Removal (2019)
Working Paper: Judgement Day: Algorithmic Trading Around the Swiss Franc Cap Removal (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0711
Access Statistics for this paper
More papers in Bank of England working papers from Bank of England Bank of England, Threadneedle Street, London, EC2R 8AH. Contact information at EDIRC.
Bibliographic data for series maintained by Digital Media Team ().