| 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. |