Network structure and pricing in the FX market

• 成果类型: Article
• 署名作者: Hasbrouck, Joel; Levich, Richard M.
• 署名单位: New York University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2021.04.013
• 发表日期: 2021
• 页码: 705-729
• 关键词: foreign exchange; CLS bank; Dealer networks; trading costs; centrality

摘要

We construct the network, centrality measures, and attributions of trading profits for a sample of CLS Bank settlement data that spans diverse currency pairs, participants, and execution platforms. We define an average centrality differential as the return to the more-central counterparty in the trade. Estimates imply that the more-central counterparty receives a higher return, and that this differential increases as the counterparties' centralities diverge. These two results are consistent with a pervasive centrality premium. This premium may reflect bargaining power, but we also find evidence that the premium is partially offset by losses that central agents incur in supplying liquidity. (C) 2021 Elsevier B.V. All rights reserved.