Price discovery in the dual-platform US Treasury market

Sun, Zhuowei; Dunne, Peter G.; Li, Youwei

Abstract

Inter-dealer trading in US Treasury securities is almost equally divided between two electronic trading platforms that have only slight differences in terms of their relative liquidity and transparency. BrokerTec is more active in the trading of 2-, 5-, and 10-year T-notes while eSpeed has more active trading in the 30-year bond. Over the period studied, eSpeed provides a more pre-trade transparent platform than BrokerTec. We examine the contribution to ‘price discovery’ of activity in the two platforms using high frequency data. We find that price discovery does not derive equally from the two platforms and that the shares vary across term to maturity. This can be traced to differential trading activities and transparency of the two platforms.

Citation

Sun, Z., Dunne, P. G., & Li, Y. (2015). Price discovery in the dual-platform US Treasury market. Global finance journal, 28, 95-110. https://doi.org/10.1016/j.gfj.2015.02.001

• Journal Article Type: Article
• Acceptance Date: Feb 5, 2015
• Online Publication Date: Apr 18, 2015
• Publication Date: 2015-10
• Deposit Date: Mar 19, 2019
• Journal: Global Finance Journal
• Print ISSN: 1044-0283
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 28
• Pages: 95-110
• DOI: https://doi.org/10.1016/j.gfj.2015.02.001
• Keywords: Microstructure; Treasury market; Bid–ask spread; Price discovery
• Public URL: https://hull-repository.worktribe.com/output/1113373
• Publisher URL: https://www.sciencedirect.com/science/article/abs/pii/S1044028315000071?via%3Dihub
• Related Public URLs: https://pure.qub.ac.uk/en/publications/price-discovery-in-the-dual-platform-us-treasury-market
• Additional Information: This article is maintained by: Elsevier; Article Title: Price discovery in the dual-platform US Treasury market; Journal Title: Global Finance Journal; CrossRef DOI link to publisher maintained version: https://doi.org/10.1016/j.gfj.2015.02.001; Content Type: article; Copyright: Copyright © 2015 Elsevier Inc. All rights reserved.