Judgement Day: Algorithmic Trading Around the Swiss Franc Cap Removal

Item Type Monograph (Working Paper)
Abstract A key issue raised by the rapid growth of computerised algorithmic trading is how it responds in extreme situations. Using data on foreign exchange orders and transactions that includes identification of algorithmic trading, we find that this type of trading contributed to the deterioration of market quality following the removal of the cap on the Swiss franc on 15 January 2015, which was an event that came as a complete surprise to market participants. In particular, we find that algorithmic traders withdrew liquidity and generated uninformative volatility in Swiss franc currency pairs, while human traders did the opposite. However, we find no evidence that algorithmic trading propagated these adverse effects on market quality to other currency pairs.
Authors Breedon, Francis; Chen, Louisa; Ranaldo, Angelo & Vause, Nicholas
Language English
Keywords Swiss franc, algorithmic trading, liquidity, volatility, price discovery, arbitrage opportunities
Subjects finance
HSG Classification contribution to scientific community
Date 16 February 2018
Publisher SoF HSG
Series Name School of Finance Working Paper Series
Volume 2018
Number 08
Official URL https://papers.ssrn.com/sol3/papers.cfm?abstract_i...
Depositing User Christina Ihasz
Date Deposited 27 Feb 2018 10:27
Last Modified 24 Feb 2022 01:25
URI: https://www.alexandria.unisg.ch/publications/253760

Download

Full text not available from this repository.

Citation

Breedon, Francis; Chen, Louisa; Ranaldo, Angelo & Vause, Nicholas: Judgement Day: Algorithmic Trading Around the Swiss Franc Cap Removal. School of Finance Working Paper Series, 2018, 08.

Statistics

https://www.alexandria.unisg.ch/id/eprint/253760
Edit item Edit item
Feedback?