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Master's Dissertation
Full name
Gustavo Sung
Knowledge Area
Date of Defense
Ribeirão Preto, 2021
Ferreira, Alex Luiz (President)
Natraj, Ganesh Viswanath
Santos, André Alves Portela
Title in English
The effects of the central bank intervention auctions on the foreign exchange futures market: evidence from Brazil
Keywords in English
Central Bank of Brazil FX intervention auctions
Foreign exchange markets
Market microstructure
Abstract in English
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.
Title in Portuguese
Os efeitos dos leilões de intervenção do banco central no mercado futuro de câmbio: evidências do Brasil
Keywords in Portuguese
Leilão e intervenção do Banco Central
Mercado de câmbio brasileiro
Microestrutura de mercado
Abstract in Portuguese
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.
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