EconPapers    
Economics at your fingertips  
 

Are market makers uninformed and passive? Signing trades in the absence of quotes

Albert Menkveld, Asani Sarkar and Michel van der Wel ()

No 395, Staff Reports from Federal Reserve Bank of New York

Abstract: We develop a new likelihood-based approach to signing trades in the absence of quotes. This approach is equally efficient as the existing Markov-chain Monte Carlo methods, but more than ten times faster. It can address the occurrence of multiple trades at the same time and allows for analysis of settings in which trade times are observed with noise. We apply this method to a high-frequency data set of thirty-year U.S. Treasury futures to investigate the role of the market maker. Most theory characterizes the market maker as an uninformed, passive supplier of liquidity. Our findings suggest, however, that some market makers actively demand liquidity for a substantial part of the day and that they are informed speculators

Keywords: Futures; Electronic trading of securities; Liquidity (Economics); Speculation (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-ecm and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr395.html (text/html)
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr395.pdf (application/pdf)

Related works:
Working Paper: Are Market Makers Uninformed and Passive? Signing Trades in The Absence of Quotes (2009) Downloads
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:fip:fednsr:395

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Staff Reports from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Gabriella Bucciarelli ().

 
Page updated 2024-04-15
Handle: RePEc:fip:fednsr:395