Working Paper: NBER ID: w7416
Authors: Yinwong Cheung; Menzie D. Chinn
Abstract: We report findings from a survey of United States foreign exchange traders. Our results indicate that: (i) The share of customer business, versus interbank business, has remained fairly constant; (ii) The channels by which transactions take place have changed, as electronically-brokered transactions have risen from 2% to 46% of total, mostly at the expense of transactions undertaken by traditional brokers; (iii) The single most widely- cited reason for deviating from the standard market convention on the bid-ask spread is a thin/hectic market; (iv) Half or more of market respondents believe that large players dominate in the dollar-pound and dollar-Swiss franc markets; and (v) 60% of respondents believe there is low predictability of exchange rates intraday. Even at medium and long run horizons, only a third of traders believe that there is high predictability.
Keywords: No keywords provided
JEL Codes: F31; G15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Market conditions (D49) | Bid-ask spread (D44) |
| Increased market volatility (G19) | Wider bid-ask spreads (G19) |
| Thin and hectic markets (G19) | Wider bid-ask spreads (G19) |
| Increased market volatility surrounding major news releases (G14) | Pricing strategies (D49) |
| Reputation maintenance (M14) | Trader behavior (L14) |
| Market structure (D49) | Trader behavior (L14) |
| Trading profits (D33) | Bid-ask spreads (G19) |