This paper examines the impact of electronic trading systems on the bid-ask spreads in the foreign exchange market. The paper finds: first, the EBS reduces spreads significantly; second, the EBS is more influential than the Reuters system for the currency pair DEM/USD; third, dealers with...

Many studies have shown that the correlation of stock portfolio returns is higher during market downturns, while very few of them offer an explanation for the causes of such an asymmetry. This article examines potential fundamental causes for the phenomenon. We find that such an asymmetry is...

This article examines how differently the same dealer quotes in the inter-dealer and customer foreign exchange markets that have different market structures. The model first predicts that customer spreads are generally wider than inter-dealer ones due to less transparency in the customer market....

This article empirically examines the relationship between order sizes and spreads in the foreign exchange (FX) market based on a FX dealer's quotes. It is found that spreads are independent of order sizes in the inter-dealer market, but they are negatively correlated in the customer market....

This paper explains exchange rate dynamics by linking financial customers’ foreign exchange order flow with their dynamic portfolio reallocation. For any currency pair in a particular period, one currency has higher assets return than the other and can be considered the high-return-currency...