Liquidity Withdrawal in the FX Spot Market: A Cross-Country Study Using High-Frequency Data

Alexis Stenfors and Masayuki Susai
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Masayuki Susai: Nagasaki University

No 2017-06, Working Papers in Economics & Finance from University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group

Abstract: This paper studies the frequency and speed of limit order cancellations in the FX spot market for three categories of currency pairs. The first category includes the three most actively traded currency pairs (EUR/USD, USD/JPY and EUR/JPY), which have been at the forefront of algorithm trading. The second category includes two smaller G10 currency pairs (EUR/SEK and EUR/NOK) and the third category (USD/MXN, USD/RUB and USD/TRY) includes three of the most actively traded emerging market currencies. By investigating both market-specific and order-specific drivers of liquidity withdrawal, we report several findings that could serve to question traditional market microstructure theory as well as conventional 'market wisdom' with regards to trading behaviour on electronic trading platforms.

Keywords: market microstructure; limit order book; foreign exchange; high-frequency trading; algorithmic trading (search for similar items in EconPapers)
JEL-codes: D4 F3 (search for similar items in EconPapers)
Pages: 47
Date: 2017-06-14
New Economics Papers: this item is included in nep-mst
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Liquidity withdrawal in the FX spot market: A cross-country study using high-frequency data (2019)
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