The microstructure of a U.S. Treasury ECN: the BrokerTec platform

Michael Fleming, Bruce Mizrach and Giang Nguyen

No 381, Staff Reports from Federal Reserve Bank of New York

Abstract: 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.

Keywords: information; bid-ask spreads; microstructure; Treasury market; price impact (search for similar items in EconPapers)
JEL-codes: C32 G12 G14 (search for similar items in EconPapers)
Pages: 54
Date: 2009-07-01
New Economics Papers: this item is included in nep-mst
Note: Revised March 2017. For a published version of this report, see Michael J. Fleming, Bruce Mizrach, and Giang Nguyen, “The Microstructure of a U.S. Treasury ECN: The BrokerTec Platform,” Journal of Financial Markets 40, no. 1 (September 2018): 2-22.
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Citations: View citations in EconPapers (9)

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Related works:
Journal Article: The microstructure of a U.S. Treasury ECN: The BrokerTec platform (2018)
Working Paper: The Microstructure of a U.S. Treasury ECN: The Brokertec Platform (2008)
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