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Working Paper
Market Liquidity in Treasury Futures Market During March 2020
We study the behavior of liquidity providers and liquidity consumers in the 10-year U.S. Treasury futures market during the height of the COVID-19 shock in March 2020, a period of market turmoil when demand for liquidity was high. In March 2020, PTFs reduced their volume of liquidity providing trades as a share of total trading volume. However, they still accounted for the lion share of total liquidity provision and their liquidity provision improved market liquidity. In contrast, dealers (banks and non-banks) increased their volume of liquidity providing trades as a share of total trading ...
Working Paper
Price Discovery in the U.S. Treasury Cash Market: On Principal Trading Firms and Dealers
We explore the following question: does the trading activity of registered dealers on Treasury interdealer broker (IDB) platforms differ from that of principal trading firms (PTFs), and if so, how and to what effect on market liquidity? To do so, we use a novel dataset that combines Treasury cash transaction reports from FINRA’s Trade Reporting and Compliance Engine (TRACE) and publicly available limit order book data from BrokerTec. We find that trades conducted in a limit order book setting have high permanent price impact when a PTF is the passive party, playing the role of ...