Stabsseminar ved Dagfinn Rime

Dagfinn Rime, Universitetet i Oslo/BI, holder stabsseminar ved Institutt for foretaksøkonomi fredag 24. mars

21.03.2001 - Elin F. Styve

Tema er Customer Trading and Private Information in Foreign Exchange Markets

Tid og sted:
Fredag 23. mars, kl. 1215-1330 i Karl Borchs aud.

Abstract
Recent research point to the possible existence of private information in foreign exchange markets. Dealers claim that customer orders are their most important source of private information, and that banks with a large customer base have a competitive advantage. Previous studies by Lyons (1995), Yao (1998a) and Bjønnes and Rime (2000) focus on the dealer's pricing decision under the assumptions that it is only the initiator of a trade that may have private information and that the knowledge of the identity of the counterpart is unimportant when setting
prices. In this paper we relax both assumptions. We also consider the dealer's order placement decision. Our results suggest that customer trades influence the placement of orders. The dealers tend to take the same positions as their customers. There is also evidence that dealers price discriminate customers. Spreads to customers are wider than to other dealers. The pricing decision in the interbank market is, however, not affected by customer trades. We find no evidence that dealers price discriminate other dealers they think may be particularly well-informed.

Paper kan hentes fra instituttets hjemmeside på internett: www.nhh.no/for/seminars/2001-spring/230301.pdf.

Kontaktperson: Hans K. Hvide (9283)