FX (Foreign Exchange)

FX Market Making with Internal Liquidity ArXiv ID: 2512.04603 “View on arXiv” Authors: Alexander Barzykin, Robert Boyce, Eyal Neuman Abstract As the FX markets continue to evolve, many institutions have started offering passive access to their internal liquidity pools. Market makers act as principal and have the opportunity to fill those orders as part of their risk management, or they may choose to adjust pricing to their external OTC franchise to facilitate the matching flow. It is, a priori, unclear how the strategies managing internal liquidity should depend on market condions, the market maker’s risk appetite, and the placement algorithms deployed by participating clients. The market maker’s actions in the presence of passive orders are relevant not only for their own objectives, but also for those liquidity providers who have certain expectations of the execution speed. In this work, we investigate the optimal multi-objective strategy of a market maker with an option to take liquidity on an internal exchange, and draw important qualitative insights for real-world trading. ...

Looking into informal currency markets as Limit Order Books: impact of market makers ArXiv ID: 2503.03858 “View on arXiv” Authors: Unknown Abstract This study pioneers the application of the market microstructure framework to an informal financial market. By scraping data from websites and social media about the Cuban informal currency market, we model the dynamics of bid/ask intentions using a Limit Order Book (LOB). This approach enables us to study key characteristics such as liquidity, stability and volume profiles. We continue exploiting the Avellaneda-Stoikov model to explore the impact of introducing a Market Maker (MM) into this informal setting, assessing its influence on the market structure and the bid/ask dynamics. We show that the Market Maker improves the quality of the market. Beyond their academic significance, we believe that our findings are relevant for policymakers seeking to intervene informal markets with limited resources. ...

Opinion formation in the world trade network ArXiv ID: 2401.02378 “View on arXiv” Authors: Unknown Abstract We extend the opinion formation approach to probe the world influence of economical organizations. Our opinion formation model mimics a battle between currencies within the international trade network. Based on the United Nations Comtrade database, we construct the world trade network for the years of the last decade from 2010 to 2020. We consider different core groups constituted by countries preferring to trade in a specific currency. We will consider principally two core groups, namely, 5 Anglo-Saxon countries which prefer to trade in US dollar and the 11 BRICS+ which prefer to trade in a hypothetical currency, hereafter called BRI, pegged to their economies. We determine the trade currency preference of the other countries via a Monte Carlo process depending on the direct transactions between the countries. The results obtained in the frame of this mathematical model show that starting from year 2014 the majority of the world countries would have preferred to trade in BRI than USD. The Monte Carlo process reaches a steady state with 3 distinct groups: two groups of countries preferring, whatever is the initial distribution of the trade currency preferences, to trade, one in BRI and the other in USD, and a third group of countries swinging as a whole between USD and BRI depending on the initial distribution of the trade currency preferences. We also analyze the battle between USD, EUR and BRI, and present the reduced Google matrix description of the trade relations between the Anglo-Saxon countries and the BRICS+. ...