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I noticed that spread on currency pairs shoots up to 5x larger around 22:00 GMT. Then it slowly goes down back to normal levels around 23:00 GMT.

Does anyone know why?

thanks!

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    $\begingroup$ 2200 GMT is equivalent to 1700 New York time. That's when the activity in FX in New York stops, i.e. the end of the business day for the NY time zone. Then after a pause a new trading day starts. $\endgroup$ – Alex C Feb 28 '18 at 8:14
  • $\begingroup$ @AleC "after a pause the trading day starts" - what pause are you talking about? Do all NY traders go instantly home at 5pm and nobody trades a minute longer? I mean they are not postoffice employees 😛 $\endgroup$ – elemolotiv Feb 28 '18 at 10:08
  • $\begingroup$ I'm sure the traders are there, hard at work ;) . But they are signaling to you they don't want to do business with you.. $\endgroup$ – Alex C Feb 28 '18 at 20:14
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International banks will pass their trading from one centre to the next, so London hands over to NY, which hands over to Tokyo etc. When a centre takes the reins, they may not want to keep the same position as the previous one; perhaps London was happy being long Euro but NY wants to shift that to be long Yen, or they can't maintain the tight spreads around the Cable prices. So during that initial handover period, the easy thing to do is just widen all the spreads until you've got your system configured and set up the way you want it, then you can bring the spreads in.

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  • $\begingroup$ thanks @Phil-H - but if NY hands over to Tokyo and Tokyo closes the NY positions before they start their own trading session, we would see an increased volume around 22:00 GMT, thus more liquidity, thus lower spreads. But we see the opposite. So I probably did not understand your reasoning... I'd love to read your comments! $\endgroup$ – elemolotiv Feb 28 '18 at 21:13
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    $\begingroup$ The positions are not closed arbitrarily as far as I know. Trading should be generally thin at handover, partly because the market in each centre has its own view, so there will be a period of discovery of whether there is a level change for this centre. $\endgroup$ – Phil H Mar 1 '18 at 15:14
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22 GMT is 5pm nyc. Thats the time when all the ECNs and liquidity providers stop operation to be restated at 5.30 nyc time again. That's why you see such spreads. Probably starts to widening at 4.30pm since most liquidity providers starts to unload any remaining inventory so they can close the day flat.

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