The effects of the central bank intervention auctions on the foreign exchange futures market: evidence from Brazil

Detalhes bibliográficos
Autor(a) principal: Sung, Gustavo
Data de Publicação: 2021
Tipo de documento: Dissertação
Idioma: eng
Título da fonte: Biblioteca Digital de Teses e Dissertações da USP
Texto Completo: https://www.teses.usp.br/teses/disponiveis/96/96131/tde-24092021-153351/
Resumo: This research studied market participants\' behavior to the Central Bank of Brazil (CBB) FX intervention auction. Our objective was to understand how market participants reacted to these macroeconomic events, incorporated new information, and transmitted it to the prices. Based on high-frequency data, it was examined and described a specific trading day of the Brazilian FX futures market, November 26 th, 2019. This strategy allowed us to identify the exact moment the new information arrived and how the market participants reacted. Empirically, we analyzed how those intervention auctions affected the market liquidity and the contribution of bid and ask quotes to price discovery. We used four liquidity indexes and the information share (IS) and the component share (CS) price discovery metrics. The liquidity results showed that the most illiquidity periods occurred at the CBB FX intervention auction periods, mainly the unexpected ones. As for the price discovery, the results indicated that the contribution of the bid (buy-side) and ask (sell-side) quotes to price discovery was asymmetric on that day. With more net buys in the market, the sell-side contributed more to price discovery than the buy-side. In addition to that, the contribution of bid quote and ask quote to price discovery in the Brazilian futures markets varied along the day. The CBB FX selling intervention auctions and, consequently, the negative order flow impacted those changes.
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spelling The effects of the central bank intervention auctions on the foreign exchange futures market: evidence from BrazilOs efeitos dos leilões de intervenção do banco central no mercado futuro de câmbio: evidências do BrasilCentral Bank of Brazil FX intervention auctionsForeign exchange marketsLeilão e intervenção do Banco CentralMarket microstructureMercado de câmbio brasileiroMicroestrutura de mercadoThis research studied market participants\' behavior to the Central Bank of Brazil (CBB) FX intervention auction. Our objective was to understand how market participants reacted to these macroeconomic events, incorporated new information, and transmitted it to the prices. Based on high-frequency data, it was examined and described a specific trading day of the Brazilian FX futures market, November 26 th, 2019. This strategy allowed us to identify the exact moment the new information arrived and how the market participants reacted. Empirically, we analyzed how those intervention auctions affected the market liquidity and the contribution of bid and ask quotes to price discovery. We used four liquidity indexes and the information share (IS) and the component share (CS) price discovery metrics. The liquidity results showed that the most illiquidity periods occurred at the CBB FX intervention auction periods, mainly the unexpected ones. As for the price discovery, the results indicated that the contribution of the bid (buy-side) and ask (sell-side) quotes to price discovery was asymmetric on that day. With more net buys in the market, the sell-side contributed more to price discovery than the buy-side. In addition to that, the contribution of bid quote and ask quote to price discovery in the Brazilian futures markets varied along the day. The CBB FX selling intervention auctions and, consequently, the negative order flow impacted those changes.Esta pesquisa tem como objetivo estudar o comportamento dos participantes do mercado diante dos leilões de intervenção cambial do Banco Central do Brasil (CBB). Procuramos entender como os participantes do mercado reagiram a esses eventos macroeconômicos, incorporaram novas informações e as transmitiram para os preços. Utilizando dados de alta frequência do mercado de câmbio futuro brasileiro, investigamos um dia de pregão 26 de novembro, 2019. Essa estratégia nos permitiu identificar o momento exato em que as novas informações chegaram e como o mercado reagiu. Empiricamente, analisamos como esses leilões de intervenção afetaram a liquidez do mercado e a descoberta de preços entre vendedores (ask quote) e compradores (bid quote). Usamos quatro índices de liquidez e para a descoberta de preço, as métricas Information Share (IS) e do Component Share (CS). Os resultados de liquidez mostraram que os períodos de maior iliquidez ocorram durante os leilões de intervenção, principalmente nos não programados. Quanto à descoberta de preços, os resultados indicaram que a contribuição entre compradores e vendedores foi assimétrica. Com maior pressão de compra no mercado, o lado da venda contribuiu mais para a descoberta do preço do que o lado da compra. Além disso, essa contribuição para formação do preço variou ao longo do dia. A presença de leilões de venda do CBB e, consequentemente o fluxo de ordem negativo, impactaram os resultados.Biblioteca Digitais de Teses e Dissertações da USPFerreira, Alex LuizSung, Gustavo2021-06-25info:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/masterThesisapplication/pdfhttps://www.teses.usp.br/teses/disponiveis/96/96131/tde-24092021-153351/reponame:Biblioteca Digital de Teses e Dissertações da USPinstname:Universidade de São Paulo (USP)instacron:USPLiberar o conteúdo para acesso público.info:eu-repo/semantics/openAccesseng2021-10-06T18:53:04Zoai:teses.usp.br:tde-24092021-153351Biblioteca Digital de Teses e Dissertaçõeshttp://www.teses.usp.br/PUBhttp://www.teses.usp.br/cgi-bin/mtd2br.plvirginia@if.usp.br|| atendimento@aguia.usp.br||virginia@if.usp.bropendoar:27212021-10-06T18:53:04Biblioteca Digital de Teses e Dissertações da USP - Universidade de São Paulo (USP)false
dc.title.none.fl_str_mv The effects of the central bank intervention auctions on the foreign exchange futures market: evidence from Brazil
Os efeitos dos leilões de intervenção do banco central no mercado futuro de câmbio: evidências do Brasil
title The effects of the central bank intervention auctions on the foreign exchange futures market: evidence from Brazil
spellingShingle The effects of the central bank intervention auctions on the foreign exchange futures market: evidence from Brazil
Sung, Gustavo
Central Bank of Brazil FX intervention auctions
Foreign exchange markets
Leilão e intervenção do Banco Central
Market microstructure
Mercado de câmbio brasileiro
Microestrutura de mercado
title_short The effects of the central bank intervention auctions on the foreign exchange futures market: evidence from Brazil
title_full The effects of the central bank intervention auctions on the foreign exchange futures market: evidence from Brazil
title_fullStr The effects of the central bank intervention auctions on the foreign exchange futures market: evidence from Brazil
title_full_unstemmed The effects of the central bank intervention auctions on the foreign exchange futures market: evidence from Brazil
title_sort The effects of the central bank intervention auctions on the foreign exchange futures market: evidence from Brazil
author Sung, Gustavo
author_facet Sung, Gustavo
author_role author
dc.contributor.none.fl_str_mv Ferreira, Alex Luiz
dc.contributor.author.fl_str_mv Sung, Gustavo
dc.subject.por.fl_str_mv Central Bank of Brazil FX intervention auctions
Foreign exchange markets
Leilão e intervenção do Banco Central
Market microstructure
Mercado de câmbio brasileiro
Microestrutura de mercado
topic Central Bank of Brazil FX intervention auctions
Foreign exchange markets
Leilão e intervenção do Banco Central
Market microstructure
Mercado de câmbio brasileiro
Microestrutura de mercado
description This research studied market participants\' behavior to the Central Bank of Brazil (CBB) FX intervention auction. Our objective was to understand how market participants reacted to these macroeconomic events, incorporated new information, and transmitted it to the prices. Based on high-frequency data, it was examined and described a specific trading day of the Brazilian FX futures market, November 26 th, 2019. This strategy allowed us to identify the exact moment the new information arrived and how the market participants reacted. Empirically, we analyzed how those intervention auctions affected the market liquidity and the contribution of bid and ask quotes to price discovery. We used four liquidity indexes and the information share (IS) and the component share (CS) price discovery metrics. The liquidity results showed that the most illiquidity periods occurred at the CBB FX intervention auction periods, mainly the unexpected ones. As for the price discovery, the results indicated that the contribution of the bid (buy-side) and ask (sell-side) quotes to price discovery was asymmetric on that day. With more net buys in the market, the sell-side contributed more to price discovery than the buy-side. In addition to that, the contribution of bid quote and ask quote to price discovery in the Brazilian futures markets varied along the day. The CBB FX selling intervention auctions and, consequently, the negative order flow impacted those changes.
publishDate 2021
dc.date.none.fl_str_mv 2021-06-25
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/masterThesis
format masterThesis
status_str publishedVersion
dc.identifier.uri.fl_str_mv https://www.teses.usp.br/teses/disponiveis/96/96131/tde-24092021-153351/
url https://www.teses.usp.br/teses/disponiveis/96/96131/tde-24092021-153351/
dc.language.iso.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv
dc.rights.driver.fl_str_mv Liberar o conteúdo para acesso público.
info:eu-repo/semantics/openAccess
rights_invalid_str_mv Liberar o conteúdo para acesso público.
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.coverage.none.fl_str_mv
dc.publisher.none.fl_str_mv Biblioteca Digitais de Teses e Dissertações da USP
publisher.none.fl_str_mv Biblioteca Digitais de Teses e Dissertações da USP
dc.source.none.fl_str_mv
reponame:Biblioteca Digital de Teses e Dissertações da USP
instname:Universidade de São Paulo (USP)
instacron:USP
instname_str Universidade de São Paulo (USP)
instacron_str USP
institution USP
reponame_str Biblioteca Digital de Teses e Dissertações da USP
collection Biblioteca Digital de Teses e Dissertações da USP
repository.name.fl_str_mv Biblioteca Digital de Teses e Dissertações da USP - Universidade de São Paulo (USP)
repository.mail.fl_str_mv virginia@if.usp.br|| atendimento@aguia.usp.br||virginia@if.usp.br
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