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on Market Microstructure |
| By: | Richard Finlay (Federal Reserve Bank of New York); Ben Jackman (Reserve Bank of Australia); Dmitry Titkov (Reserve Bank of Australia) |
| Abstract: | The market for futures on Australian Government Securities (AGS) is one of Australia's key markets for trading interest rate risk, and turnover in AGS futures is substantially greater than turnover in AGS themselves. We examine liquidity in the market for futures on AGS using granular 'tick-level' data that captures trades and changes at the top of the order book from October 2019 to June 2025. We find liquidity deteriorated at the onset of COVID-19 and around the end of the RBA's yield target. Nevertheless, the market for AGS futures functioned well in the period, with market participants always able to transact (albeit sometimes at higher transaction costs). For 'news' events in the period – such as monetary policy decisions and economic data releases, which are inherently uncertain – we find liquidity tended to deteriorate briefly following these events but recovered before day's end. By contrast, for 'flow' events – such as pre-announced purchases and sales of AGS, including syndicated issuance – we find liquidity improved in anticipation of these events and smooth trading conditions were maintained. A better understanding of how liquidity in AGS futures changes in response to market-moving events should assist AGS market participants – including the RBA – to extract and interpret information from market data, and to design any AGS market transactions to maximise effectiveness while minimising side effects. |
| Keywords: | bond futures; liquidity; COVID-19 |
| JEL: | G13 G14 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:rba:rbardp:rdp2025-07 |
| By: | Maxim Bichuch; Zachary Feinstein |
| Abstract: | An automated market maker (AMM) provides a method for creating a decentralized exchange on the blockchain. For this purpose, individual investors lend liquidity to the AMM pool in exchange for a stream of fees earned from its operations as a market maker. Within this work, we reinterpret the loss-versus-rebalancing as the implied fee stream generated by an AMM so that a risk-neutral investor is indifferent in the decision of providing liquidity. With this implied fee structure, we propose a novel fixed-for-floating swap on the fees generated by an AMM in order to quote the implied volatilities and implied correlations of digital assets. We apply this theory to realized fees in different markets to empirically validate the relevance of the deduced fee-based volatility. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.23222 |
| By: | Nahid Rahman; Joseph Al-Chami; Jeremy Clark |
| Abstract: | Decentralized prediction markets (DePMs) allow open participation in event-based wagering without fully relying on centralized intermediaries. We review the history of DePMs which date back to 2011 and includes hundreds of proposals. Perhaps surprising, modern DePMs like Polymarket deviate materially from earlier designs like Truthcoin and Augur v1. We use our review to present a modular workflow comprising seven stages: underlying infrastructure, market topic, share structure and pricing, trading, market resolution, settlement, and archiving. For each module, we enumerate the design variants, analyzing trade-offs around decentralization, expressiveness, and manipulation resistance. We also identify open problems for researchers interested in this ecosystem. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.15612 |