We Missed It Again! Why Do So Many Market Orders in High-Frequency FX Trading Fail to be Executed?

Susai, Masayuki; Yoshida, Yushi

doi:10.1016/b978-0-12-802205-4.00013-0

Cited by 1 publication

(1 citation statement)

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“…The vast majority of the academic research so far has been conducted on stock markets. However, surveys and studies suggest that algorithmic trading in the FX markets has resulted in similar outcomes as in other financial markets: tighter bid-ask spreads, higher turnover, a more substantial number of (small) orders and a reduction in the average lifetime of orders (BIS, 2011;Susai and Yoshida, 2015). Overall, it appears as if algorithmic traders have contributed to better market liquidity in a range of financial markets, at least during periods of stability.…”

Section: Introductionmentioning

confidence: 99%

Liquidity withdrawal in the FX spot market: A cross-country study using high-frequency data

Stenfors

Susai

2019

Journal of International Financial Markets, Institutions and Mo

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This paper studies short-term liquidity withdrawal in the FX spot market for eight currency pairs. We include over 3 million limit order submissions, worth more than $5 trillion, and investigate the drivers of two different measures of volume-based liquidity. Overall, we find that market participants react differently to changes in the state of the market for different currency pairs. Moreover, the liquidity withdrawal process also differs depending on the perceived information content of new limit orders submitted. Finally, we document that a 'liquidity illusion' might exist in FX spot markets electronic trading platforms where algorithmic and high-frequency trading is prominent. Highlights  FX spot markets react very differently to changes in the state of the market.  The perceived information content of new limit order submissions is important.  Order-splitting strategies appear successful but could be detrimental to the market.  A 'liquidity illusion' seems to exist in the electronic FX spot market.  This has implications for market participants and policymakers.

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Section: Introductionmentioning

confidence: 99%