IDEAS home Printed from https://ideas.repec.org/a/taf/eurjfi/v26y2020i15p1569-1589.html
   My bibliography  Save this article

Flash crash in an OTC market: trading behaviour of agents in times of market stress

Author

Listed:
  • Florian Schroeder
  • Andrew Lepone
  • Henry Leung
  • Stephen Satchell

Abstract

We examine the 21-minute flash crash in the spot rate for Pound Sterling (GBP/USD) in October 2016. During this period, the sterling price fell 9%. Proprietary data reported to the Financial Conduct Authority show that the round-trip costs of dealers are 60 times higher during the flash crash compared to normal times given liquidity constraints. Further, dealers reduce their trading volume to 1% of the level during normal times. This may be attributable to the collapse of the inter-dealer market during the crash, where dealers could only hedge 31% of their clients’ trades with each other.

Suggested Citation

  • Florian Schroeder & Andrew Lepone & Henry Leung & Stephen Satchell, 2020. "Flash crash in an OTC market: trading behaviour of agents in times of market stress," The European Journal of Finance, Taylor & Francis Journals, vol. 26(15), pages 1569-1589, October.
    • Handle: RePEc:taf:eurjfi:v:26:y:2020:i:15:p:1569-1589
    DOI: 10.1080/1351847X.2020.1748893
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/1351847X.2020.1748893
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/1351847X.2020.1748893?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Breedon, Francis & Chen, Louisa & Ranaldo, Angelo & Vause, Nicholas, 2023. "Judgment day: Algorithmic trading around the Swiss franc cap removal," Journal of International Economics, Elsevier, vol. 140(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:eurjfi:v:26:y:2020:i:15:p:1569-1589. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/REJF20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.