This paper makes three contributions to our understanding of the price discovery process in currency markets. First, it provides evidence that this process cannot be the familiar one based on adverse selection and customer spreads, since such spreads are inversely related to a trade's likely...

This paper examines the roles of order flow (reflecting private information) and news (reflecting public information) in explaining exchange rate volatility. Analyzing four months of a bank's high frequency US dollar-euro trading, three order flows are used in addition to seasonal patterns in...

This study examines profits and speculation in the USD/EUR trading of a bank in Germany over a four-month period. Dealing activity at the bank generates profits but speculation does not seem to contribute to this. We find that speculative positions fail to become profitable within a 30-minutes'...

This paper examines the roles of order flow (reflecting private information) and news (reflecting public information) in explaining exchange rate volatility. Analyzing four months of a bank's high frequency dollar/euro trading, three different kinds of order flow are used in addition to seasonal...

There are strong calls for the introduction of a "Tobin tax" on foreign exchange (FX) transactions. Despite its popularity, research has not yet made full use of available insights from the recent microstructure literature. The role of banks in FX trading is quite different from the assumptions...

This paper makes three contributions to our understanding of the price discovery process in currency markets. First, it provides evidence that this process cannot be the familiar one based on adverse selection and customer spreads, since such spreads are inversely related to a trade's likely...