Forex trading and the WMR Fix

I examine the behavior of forex prices around the setting of the 4:00 pm WMR Fix. Numerous banks have been fined by regulators for their trading activities around the Fix, but the overall impact of their actions is not known. I first examine trading patterns around the Fix in a microstructure model...

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Bibliographic Details
Published in:Journal of banking & finance 2018-02, Vol.87, p.233-247
Main Author: Evans, Martin D.D.
Format: Article
Language:English
Subjects:
Forex Price Fixes
Forex trading
Microstructure Trading Models
Order flows
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Summary:I examine the behavior of forex prices around the setting of the 4:00 pm WMR Fix. Numerous banks have been fined by regulators for their trading activities around the Fix, but the overall impact of their actions is not known. I first examine trading patterns around the Fix in a microstructure model of competitive trading. I then compare the model with the empirical behavior of forex prices across 21 currencies over a decade. Contrary to the predictions of the model, forex price changes display extraordinary volatility and negative serial correlation around the Fix.
ISSN:0378-4266
1872-6372
DOI:10.1016/j.jbankfin.2017.09.017