Forex Trading and the WMR Fix

Evans, Martin (2017): Forex Trading and the WMR Fix. Forthcoming in: Journal of Banking and Finance

Abstract

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Forex Trading, Order Flows, Forex Price Fixes, Microstructure Trading Models
• Subjects: F - International Economics > F3 - International Finance > F30 - General; F - International Economics > F3 - International Finance > F31 - Foreign Exchange; G - Financial Economics > G1 - General Financial Markets

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