Judgment day: Algorithmic trading around the Swiss franc cap removal

• 成果类型: Article
• 署名作者: Breedon, Francis; Chen, Louisa; Ranaldo, Angelo; Vause, Nicholas
• 署名单位: University of London; Queen Mary University London; University of Sussex; University of St Gallen; Swiss Finance Institute (SFI); Bank of England
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2022.103713
• 发表日期: 2023
• 关键词: Algorithmic trading; Swiss franc; market liquidity; Price efficiency; Central bank intervention

摘要

A key issue for decentralised markets like FX is how the market responds to extreme situations. Using data on FX transactions with a precise identification of Algorithmic trading (AT), we find that AT, broadly defined, appears to have contributed to the deterioration of market quality fol-lowing the removal of the cap on the Swiss franc on 15 January 2015 by withdrawing liquidity and generating uninformative volatility. We also find that the Swiss National Bank, after ini-tially stepping aside, played an important role, though more by signalling rather than trading. This perhaps explains why human trading - that could most easily interpret those signals - was important in stabilising the market.Crown Copyright (c) 2022 Published by Elsevier B.V. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).