nep-mst New Economics Papers
on Market Microstructure
Issue of 2025–04–21
four papers chosen by
Thanos Verousis, Vlerick Business School


  1. The Relationship between Market Depth and Liquidity Fragility in the Treasury Market By Andrew C. Meldrum; Oleg Sokolinskiy
  2. U.S. Treasury Market Functioning from the GFC to the Pandemic By Tobias Adrian; Michael J. Fleming; Kleopatra Nikolaou
  3. ANALYSIS OF PRIMARY DEALER IMPLEMENTATION IN PRO MARKET MONETARY OPERATION TRANSACTIONS By Aryo Sasongko; Cicilia Anggadewi Harun; Rahutomo Anugrah Dewanto; Wahyu Widianti; Geyana Ledy Fista; Kusfisiami Wima Mustika; Astrika Erlin; Ibrahmi Adrian Nugroho; Putra Prima Raka; Misbahol Yaqin
  4. The Impact of Media Attention on the Illiquidity of Stocks: Evidence from the Global FinTech Sector By Gaar, Eduard; Moritz, Valentin; Schiereck, Dirk

  1. By: Andrew C. Meldrum; Oleg Sokolinskiy
    Abstract: Analysis of market liquidity often focuses on measures of the current cost of trading. However, investors and policy-makers also care about what would happen to liquidity in the event of an adverse shock. If liquidity were to deteriorate rapidly at times when investors were seeking to rebalance portfolios, this could amplify the effects of shocks to the financial system even if liquidity is high most of the time. We examine the potential for such fragility of liquidity in the Treasury market. We show that a reduction in the availability of resting orders to trade ("market depth") increases liquidity fragility, likely because lower depth increases the dependence of low trading costs on prompt replenishment of resting orders. Our results apply to all major benchmark Treasury securities individually, which enables us to establish analogous conclusions for market-wide liquidity fragility.
    Keywords: Liquidity; Fragility; Treasury market; Price impact; Volatility; Market depth; Hidden Markov model
    JEL: G01 G10 G12 C51 C58
    Date: 2025–02–21
    URL: https://d.repec.org/n?u=RePEc:fip:fedgfe:2025-14
  2. By: Tobias Adrian; Michael J. Fleming; Kleopatra Nikolaou
    Abstract: This article examines U.S. Treasury securities market functioning from the global financial crisis (GFC) through the Covid-19 pandemic given the ensuing market developments and associated policy responses. We describe the factors that have affected intermediaries, including regulatory changes, shifts in ownership patterns, and increased electronic trading. We also discuss their implications for market functioning in both normal times and times of stress. We find that alternative liquidity providers have stepped in as constraints on dealer liquidity provision have tightened, supporting liquidity during normal times, but with less clear effects at times of stress. We conclude with a brief discussion of more recent policy initiatives that are intended to promote market resilience.
    Keywords: intermediation; liquidity; regulation; market structure; Treasury securities
    JEL: G12 G24 G28
    Date: 2025–04–01
    URL: https://d.repec.org/n?u=RePEc:fip:fednsr:99757
  3. By: Aryo Sasongko (Bank Indonesia); Cicilia Anggadewi Harun (Bank Indonesia); Rahutomo Anugrah Dewanto (Bank Indonesia); Wahyu Widianti (Bank Indonesia); Geyana Ledy Fista (Bank Indonesia); Kusfisiami Wima Mustika (Bank Indonesia); Astrika Erlin (Bank Indonesia); Ibrahmi Adrian Nugroho (Bank Indonesia); Putra Prima Raka (Bank Indonesia); Misbahol Yaqin (Bank Indonesia)
    Abstract: TThis study explores the impact of primary dealer system implementation on counterparty connections, prices, liquidity, and concentration risk in the Indonesian Money market. Using transaction data of interbank money market instruments, we find that the implementation of the primary dealer system increases the degree of centrality (number of counterparty connections) in the Indonesian Repo and time deposit markets. The implementation of primary dealers also leads to an increase in nominal transactions of Bank Indonesia Rupiah Securities (SRBI). The simulation results of primary dealer selection by clients show that the greater the demand of banks participating in monetary operations with limited primary dealer liquidity, the faster the orders are concentrated on primary dealers with large liquidity. Vice versa, the smaller the demand of banks participating in monetary operations with large liquidity, the orders tend to be scattered. The larger the order size of banks participating in monetary operations, the faster orders are concentrated in primary dealers with large liquidity. Vice versa, the smaller the order size of banks participating in monetary operations, the orders tend to be scattered.
    Keywords: Primary dealer, concentration risk, liquidity, interest rate, counterparty connection
    JEL: E43 G21 G28
    Date: 2024
    URL: https://d.repec.org/n?u=RePEc:idn:wpaper:wp102024
  4. By: Gaar, Eduard; Moritz, Valentin; Schiereck, Dirk
    Abstract: As a result of technological innovations in data processing, the exploitation of Internet usage data in relation to search engines or social networks is becoming increasingly intriguing for understanding and anticipating stock market movements. We analyze the impact of three alternative investor attention variables, i.?e. Google search volume, Wikipedia page views, and stock market-relevant news on the rapidly growing FinTech sector. The result of the simultaneous correlation analysis reveals a highly significant correlation between the trading activities of the FinTech sector and the three investor attention variables. The time-delayed regression analysis complements the results by identifying substantial changes of the effects within one week considering the order of magnitude and sign. Furthermore, multivariate regression analysis highlights that the explanatory power for future stock trading activities and illiquidity primarily depends on Google search volume and stock market-relevant news volume, while the simultaneous correlations are best explained by the number of visits to the corresponding Wikipedia page.
    Date: 2025–03–18
    URL: https://d.repec.org/n?u=RePEc:dar:wpaper:153634

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