NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Masahiro Yamada

Hitotsubashi University
2-1 Naka
Kunitachi, Tokyo, 186-8601
Japan

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Hitotsubashi University

NBER Working Papers and Publications

April 2017Did the Reform Fix the London Fix Problem?
with Takatoshi Ito: w23327
This paper examines the consequences of the 2015 reform on the London fixing in the interbank forex market, which resulted from finding and imposing a penalty on banks’ collusive behavior around the fixing window. The banks changed their behavior after the reform, and the volume spike in the fixing window disappeared. However, the anomalies on price dynamics reported in the previous literature still exist, and banks’ passive trading strategy generates another predictability in the price movement. A theoretical model of optimal execution is used to calibrate the execution of fixing transactions by banks, and evaluate the increase in the cost and risks of fixing trades incurred by the banks' behavior. This paper is the first to examine the efficiency of banks’ behavior after the reform. The ...

Published: Takatoshi Ito & Masahiro Yamada, 2017. "Did the Reform Fix the London Fix problem?," Journal of International Money and Finance, .

November 2016Puzzles in the Forex Tokyo “Fixing”: Order Imbalances and Biased Pricing by Banks
with Takatoshi Ito: w22820
“Fixing” in the foreign exchange market is a market practice that determines the bid-ask-mid-point exchange rate at a scheduled time, 10am in Tokyo and 4pm in London. The fixing exchange rate is then applied to the settlement of foreign exchange transactions between banks and retail customers including broker dealers, institutional investors, insurance companies, exporters and importers, with varying bid-ask spreads. Our findings for the Tokyo fixing are summarized as follows. (1) Price spikes in the Tokyo fixing are more frequent than in the London fixing. (2) The customer orders are biased toward buying the foreign currencies, which is predictable. (3) Before 2008, the fixing prices set by banks were biased upward, and higher than the highest transaction price during the fixing time wi...

Published: Takatoshi Ito and Masahiro Yamada, "Puzzles in the Tokyo fixing in the forex market: Order imbalances and Bank pricing" Journal of International Economics Volume 109, November 2017, Pages 214-234.

September 2015Was the Forex Fixing Fixed?
with Takatoshi Ito: w21518
“Fixing” of the exchange rate (price) is a rule among the Forex market participating institutions to set a reference/settlement price for the day. Major fixings occur at 9:55 am Tokyo time for transactions between Japanese banks and their customers, and at 4:00 pm London time for transactions between European and US banks and their customers. The two fixings have different regulations and institutions. The London fix is calculated as a median price during the one minute window around 4:00 pm. We empirically examine the movement of prices around the time of fixing. Regulators in the UK and the US have accused banks for collusive behaviors to manipulating the price around the London fixing time. It has been mentioned in the media that there was evidence of “chats” among traders of different ...

Published: This working paper was heavily revised and superseded by the following two working papers: (1) Takatoshi Ito and Masahiro Yamada, 'Puzzles in the Forex Tokyo "Fixing": Order Imbalances and Biased Pricing by Banks' NBER working paper, no. 22820. (2) Takatoshi Ito and Masahiro Yamada, 'Did the Reform Fix the London Fix Problem?' NBER working paper, no. 23327. Please use these two working papers for citation.

April 2015High-frequency, Algorithmic Spillovers Between NASDAQ and Forex
with Takatoshi Ito: w21122
We empirically examine the order flows spillovers between Nasdaq and the Forex markets in 2008 and 2009. With emphasis on a role of high-frequency traders (HFTs) who aggregate information between the two markets as well as within each market, our results show that HFTs in Nasdaq trade intensively on the market-wide information more rapidly than other market participants, and that their order flows contain more information about the Forex rates than those of the Forex themselves. As a result, order flows by HFTs in Nasdaq significantly lead those in the Forex activities. Reflecting each market's exposures to the common shocks during the Global Financial crisis, these spillovers vary over time, and HFTs have increased their influences. These empirical results are consistent with theoretical ...
 
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