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on Market Microstructure |
| By: | Henry Dyer; Michael J. Fleming |
| Abstract: | In this post, we examine the evolution of U.S. Treasury market liquidity over the past year, which has witnessed myriad economic and political developments. Liquidity worsened markedly one year ago as volatility increased following the announcement of higher-than-expected tariffs. Liquidity quickly improved when the tariff increases were partially rolled back and then remained fairly stable thereafter (through the end of our sample in February 2026), including after the recent Supreme Court decision striking down the emergency tariffs and the subsequent announcement of new tariffs. |
| Keywords: | Treasury market; liquidity; volatility; tariffs |
| JEL: | G12 G14 |
| Date: | 2026–04–02 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:102991 |
| By: | Craig Burnside; Mario Cerrato (University of Glasgow); Zhekai Zhang (SAFTI - Shenzhen Audencia Financial Technology Institute, SZU - Shenzhen University [Shenzhen] = 深圳大学, Audencia Business School) |
| Abstract: | We propose a novel pricing factor for currency returns motivated by the market microstructure literature. Our factor aggregates order flow data to provide a measure of buying and selling pressure related to conventional currency trading strategies. It successfully prices the cross-section of currency returns sorted on the basis of forward discount and momentum. The association between our factor and currency returns differs according to the customer segment of the foreign exchange market. In particular, it appears that financial customers are risk-takers in the market, while nonfinancial customers serve as liquidity providers. |
| Date: | 2025–07–08 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05445828 |
| By: | Seongjin Kim; Jin Hyuk Choi |
| Abstract: | We develop a multi-period Kyle-type model that incorporates both mandatory disclosure of informed trades and imperfect competition among market makers. We prove the existence and uniqueness of a linear equilibrium and show that the liquidity-enhancing effect of disclosure is fundamentally linked to the degree of market-making competition. Disclosure lowers trading costs by reducing price impact, and its marginal benefit is strictly larger when competition is weak. We empirically validate this prediction using the 2002 Sarbanes-Oxley Act disclosure reform as a natural experiment. A difference-in-differences analysis of U.S. equities confirms that the spread reduction following enhanced disclosure is significantly larger for stocks with fewer active market makers. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.10194 |
| By: | M. Tedde |
| Abstract: | The inclination to guess rather than to admit a lack of knowledge by responding "Don't know" can explain why investors fail the surveys intended to assess their financial competence. Using MiFID test answers and trading data, we investigate whether investors who admit their ignorance and select the "Don't know" answers trade less, a!ord lower transaction costs, and achieve better (net) returns than investors who prefer to guess and select the wrong answers. Additionally, we show that among investors who fill in the MiFID test multiple times, those who select the "Don't know" answers trade less, pay lower transaction costs and perform better than the guesser investors. |
| Keywords: | D53;D91;G11;G41;G53 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:cns:cnscwp:202601 |