Dealer Behaviour in the Euro-Zone Sovereign Bond Market
Lead Research Organisation:
Queen's University Belfast
Department Name: Queens University Management School
Abstract
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Organisations
People |
ORCID iD |
| Michael Moore (Principal Investigator) |
Publications
CHINN M
(2011)
Order Flow and the Monetary Model of Exchange Rates: Evidence from a Novel Data Set
in Journal of Money, Credit and Banking
Dunne P
(2011)
Commonality in returns, order flows, and liquidity in the Greek stock market
in The European Journal of Finance
Dunne P
(2015)
DEALER INTERMEDIATION BETWEEN MARKETS Dealer Intermediation
in Journal of the European Economic Association
Dunne P
(2012)
Dealer Intermediation between Markets
in SSRN Electronic Journal
Ferreira A
(2015)
Carry Trade e Risco Cambial: um Conto de Dois Fatores
in Revista Brasileira de Economia
Michael Moore (Author)
(2011)
For rich or for poor : when does uncovered interest parity hold?
Moore M
(2011)
On the sources of private information in FX markets
in Journal of Banking & Finance
Moore M
(2016)
Downsized FX Markets: Causes and Implications
in BIS Quarterly Review
Shehadeh A.
(2016)
US dollar carry trades in the era of "Cheap money"
in Finance a Uver - Czech Journal of Economics and Finance
| Description | We discovered that in a two tiered market, retail investors can pay a lower spread to dealers than dealers charge to each other. Two tiered markets provide higher welfare than one tiered markets but are very fragile. |
| Exploitation Route | This can be used by regulators in setting policy |
| Sectors | Government, Democracy and Justice |
| Description | 1. Conceptual impact This project started out with a very specific focus on the euro-denominated bond market. The task was to find a theoretical explanation from the robust but astonishing empirical finding that retail customers were getting a better price than wholesale dealers in this sophisticated financial market. This objective was comprehensively achieved but the research went much further. Retail and wholesale markets co-exist throughout the economy and not just in euro-denominated bond markets. The traditional view among economists is that two-tiered markets such as this arise from restrictive practices and like all restrictive practices are bad for society. Our theory had succeeded in saying something very different. Wholesale markets, to which retail customers have no access, serve a valuable social function. We showed that wholesale markets are very fragile and that policy can be focussed on keeping them in existence. Early working papers from this research twice achieved top 10 status for downloads on the Economics Research part of SSRN (the Social Science Research Network.). The two occasions were on 30th October 2010 in the Outlooks and Forecasting topic and again on 29th September 2012 in the Networks topic. Altogether papers related to this project were viewed 2347 times and downloaded 255 times from SSRN. 2. Instrumental Impact My co-author, Harald Hau formerly of INSEAD, now of the Swiss Finance Institute chaired a panel at the European Finance Association meeting in 2010. The title of the panel was "Transaction Taxes and Short-Selling Restrictions: Stability Tools or Dangerous Populism?" and he took the opportunity to highlight the practical relevance of the project to the Tobin tax question. Such panels are a mix of practitioners and academics. Among the practitioners on panel on that occasion was Carlos Tavares, Chair, Committee of European Security Regulators (CESR) An early version of the work was presented at a practitioner/ academic encounter in Frankfurt on the The Industrial Organisation of Securities Markets organised by Center for Financial Studies (CFS) and Deutsche Börse AG. Later versions of the work led to expressions of interest from both the Bank of England in 2013 and the Banque de France in 2014. In July 2014, a more complete version of the final paper was presented at a practitioner/academic conference organised by the Banco Central do Brasil in São Paulo. The title of the conference was the 9th Annual Seminar on Risk, Financial Stability and Banking. 3. Capacity Building The post-doctoral research fellow employed through this project, Dr. Arze Karam has successfully begun an academic career in the UK. She is currently a lecturer in Economics at Durham University Business School. She also leads their MSc finance programme and specifically teaches MSc market microstructure. 4. Grant bids Through this project, I built my capacity in the area of microstructure, specifically in relation to bonds. However this enabled me to apply for a new grant in a different area: exchange rates. I successfully applied for a grant from the Leverhulme trust entitled "The Finance Microstructure Approach to the Economics of Exchange Rates". Arising from the research on this project, I became part of a team that successfully bid for a grant funded by the European Commission's Marie Curie Actions Industry-Academia Partnerships and Pathways (IAPP). The project "The Efficiency of Futures Markets" is a joint cooperation program between Ghent University, Belgium, Queen's University Belfast, UK, the University of Warwick, Coventry, UK, and the alternative investment specialist RPM Risk & Portfolio Management AB from Stockholm, Sweden. |
| First Year Of Impact | 2010 |
| Sector | Education,Government, Democracy and Justice |
| Impact Types | Policy & public services |
| Description | Discussion of 'How riskless is 'riskless' arbitrage?' Kozhan & Tham |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Professional Practitioners |
| Results and Impact | This, a discussion of a paper by Roman Kozhan, was presented at the 6th Annual Central Bank Workshop on the Microstructure of Financial Markets. THe ideas were communicated to Central Banks |
| Year(s) Of Engagement Activity | 2010 |
| URL | http://www.newyorkfed.org/research/conference/2010/cb/Moore.pdf |
| Description | Market Order Flows, Limit Order Flows and Exchange Rate Dynamics |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Other audiences |
| Results and Impact | A very thoughtful discussion Invitation to give talk in Brazil |
| Year(s) Of Engagement Activity | 2013 |
| Description | Market Order Flows, Limit Order Flows and Exchange Rate Dynamics - {MM} |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Type Of Presentation | paper presentation |
| Geographic Reach | International |
| Primary Audience | Other audiences |
| Results and Impact | Information was exchanged Excellent comments led to change in research direction |
| Year(s) Of Engagement Activity | 2013 |
| Description | Market Order Flows, Limit Order Flows and Exchange Rate Dynamics - {MM} |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Type Of Presentation | paper presentation |
| Geographic Reach | International |
| Primary Audience | Other audiences |
| Results and Impact | My thoughts were developed Interest from Central Bankers present |
| Year(s) Of Engagement Activity | 2013 |
| Description | Order flow and the monetary model of exchange rates : evidence from a novel data set |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Other academic audiences (collaborators, peers etc.) |
| Results and Impact | Seminar held as part of the University of Bristol, Department of Accounting and Finance seminar series. The paper was improved by comments from the audience |
| Year(s) Of Engagement Activity | 2011 |
| URL | http://www.bristol.ac.uk/accounting/seminars/ |
| Description | Order flow and the monetary model of exchange rates : evidence from a novel data set |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Other academic audiences (collaborators, peers etc.) |
| Results and Impact | Presented as part of the Southampton University Management School research seminar series. It discusses an early draft of work which combines the conventional monetary model of exchange rates with the microstructure approach. The contribution is both theoretical and empirical. The paper was improved by comments from the audience |
| Year(s) Of Engagement Activity | 2012 |
| Description | Order flow and the monetary model of exchange rates : evidence from a novel data set - {MM} |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Other academic audiences (collaborators, peers etc.) |
| Results and Impact | Presented as part of the Lancaster University Management School economics research seminar series. It discusses an early draft of work which combines the conventional monetary model of exchange rates with the microstructure approach. The contribution is both theoretical and empirical. Excellent comments led to change in research direction |
| Year(s) Of Engagement Activity | 2010 |
| URL | http://www.lums.lancs.ac.uk/events/20723/ |
| Description | The Differential Impact of Market and Limit Orders on Foreign Exchange Rates |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Other academic audiences (collaborators, peers etc.) |
| Results and Impact | We generalise the portfolio shifts model to allow FX dealers to use both limit and market orders in order to exploit private information in inter-dealer trading. Equilibrium exchange rates depend on both types of flows. Limit orders have lower price impact than market orders because they reduce the inventory that has to be absorbed by ultimate customers. We test these predictions using data from an order-driven inter-dealer FX trading venue. Our analysis supports the predictions of the model and the empirical price impact of market order flows is substantially increased by the inclusion of limit orders as an additional variable. The paper was improved by comments from the audience |
| Year(s) Of Engagement Activity | 2012 |