Execution and Exchanges - Articles & White Papers

This article analyses the 50 worst one-day shocks and the following days in stocks, bonds, and commodities. It also looks at how the Multi-Asset Trend-Following strategy performed during the same periods. Further, the second part of this article focuses on critical geopolitical events (the starts of major wars, international…

As with most issues, it usually comes down to money. Fund managers need to constantly invest substantial sums in technology in order to keep up to date with the evolving market structure and global regulatory requirements and to optimise their trading outcomes.

Distributed ledger technology has the potential to solve some of the most prominent problems in the global economy, such as providing financial services to the 1.7 billion people that comprise the global unbanked population. However, the largest blockchains are not accessible for low-income economies or viable for daily use…

In Europe, the current settlement cycle for most transactions in equities and fixed income markets is two business days (‘T+2’). The paper follows announcements by the US and other jurisdictions earlier this year of their intention to move to shorter settlement cycles.

There is ongoing debate as to whether the practice known as “payment for order flow” (PFOF) causes price improvement for retail investors. In this paper, the author uses a randomised controlled trial to attempt to answer this question and measure the extent of price improvement. The trial involves trading random stocks at…

The market for U.S. Treasury securities experienced extreme stress in March 2020, when prices dropped precipitously (yields spiked) over a period of about two weeks. Using a theoretical model, the authors show that markets for safe assets can be fragile due to strategic interactions among investors who hold Treasury…

The authors compare execution quality of six brokerage accounts across five brokers by generating a sample of 85,000 simultaneous market orders. Commission levels and payment for order flow (PFOF) differ across our accounts. They find that execution prices vary significantly across brokers: the mean account-level round-trip…

Financial markets have a central role in allocating resources in modern economies. One of the main functions of financial markets is the discovery of information. This information in turn helps guide decisions in the real side of the economy. The literature on the 'feedback effect' of financial markets explores…

This paper investigates the relationship between central bank (reverse) auctions and bill market liquidity. The analysis includes data on the purchases of bills in the auctions by the Dutch Central Bank under the European Central Bank’s Pandemic Emergency Purchase Programme (PEPP).

This study documents properties of market-wide corporate bond liquidity and demonstrates that liquidity risk is an important determinant of returns. During market downturns, transaction costs rise for sellers and fall for buyers. The negative relation between buyer and seller liquidity motivates a new across-measure…

The authors construct a difference-in-differences simultaneous equation to study the long-term impact of price limit system on the comprehensive quality of the stock market. Moreover, they use event study method to further test short-term effect. Results show that after the setting of price limit system in China, the quality…

The report provides an update on the performance of the equity market in Europe in activities such as primary issuance, Mergers and Acquisitions (M&A), equity liquidity structure, and market valuations.

Asset/Wealth Management and Payments dominate as the most active financial services M&A verticals, with material volumes of consolidation activity across both. Consumer Finance comes next, primarily as a result of deals involving buy-now-pay-later lenders. M&A involving online brokerage, crypto trading and carbon…

The 13th Triennial Central Bank Survey of foreign exchange and over-the-counter (OTC) derivatives markets aims to obtain comprehensive and consistent information on the size and structure of global foreign exchange and OTC derivatives markets. The results are intended to increase the transparency of OTC markets and to help…

Using transaction level data from the inter-dealer market, the authors find that the price impact of one standard deviation change in FX swap order flow has increased from less than one basis point prior to 2008 to about five basis points after 2008.

The authors use transaction-level data to study trading and clearing relationships between dealers (ie, Gilt-edged Market Makers and clearing members) and their clients, and price discovery in the UK gilt cash and futures markets in 2016.

The SIFMA Research Quarterlies contain data and statistics on U.S. markets. The fixed income reports are split into two – (1) issuance and trading, (2) outstanding – given a delay in the reporting of outstanding data. The reports cover data on total U.S. fixed income markets, as captured in the SIFMA Research databases: U.S…

Market structure across asset classes is continuously evolving. Consequently, financial markets can be seen as adaptive as the underlying dynamics and interactions between the different actors are not stable through time. It is probably safe to say that financial markets go through an infinite number of states, each…

Municipal bond markets are ripe for increased automation. The buy side wants better access to liquidity and more transparency, and the dealer community increasingly sees the value of providing electronic liquidity utilising pricing models that have been refined even more through the pandemic and, more recently, inflation-…

Published in June 2022, the latest data from the Bank for International Settlements over-the-counter (OTC) derivatives statistics shows a significant decrease in the gross market value and gross credit exposure of interest rate derivatives (IRD) and foreign exchange derivatives during the first half of 2021 compared to the…