Microstructures of trading systems and currency stability

First of all let us mention few words about the theory and go back to the past a little bit so to make everything more understandable.

It is well-known that the center of financial activity moves to the periods of instability with off-exchange on the stock exchange market. Counterparts close limits against each other and transfer the operations on an organized market, the risk of which is which essentially more lowly. By means of a stock exchange the state provides stability of a national currency rate as the stock exchange gives to regulation authorities possibility effectively to manage a currency exchange rate by means of market methods.

The exchange market both with macroeconomic, and from the financial point of view possesses great importance than many other financial markets, for example, the share market. Because the foreign exchange trade is concentrated to Interbank Stock Exchange, the special place in provision of currency stability is occupied with specificity of the exchange auctions and an organized market microstructure. Depending on what are applied techniques of the auctions, differ the prices volatility, size of spreads etc.

The analysis of exchange trading by an integral part is included into the theory of a market microstructure (market microstructure theory). It represents branch of the microeconomic theory considering the markets of abstract financial assets. The theory of market microstructure studies functioning of financial markets from positions of institutes and trading mechanism of the market, behavior of economic agents and results of their activity.

The president of the American financial association and one of the main developers of the theory of M. O’Hara determines a microstructure as “process and results of trade in assets by certain rules” 1. The event analysis on financial market by means of the theory of market microstructure allows to reveal determinants of exchange rates, price volatility, liquidity of the market and its communication with other financial markets. Thereby the theory can render the invaluable help to regulation authorities in business of increase of efficiency and stability of a financial system.

The purpose of the given work – studying of specificity of exchange pricing, characteristics of the market organization and a problem the auctions transparency specify what microstructure of trading system will allow raising stability of the domestic exchange market.

The majority of scientific works in a market microstructure is devoted to the security market. The list towards stock market became especially appreciable after crash of 1987. However in 1990th research interest has moved to the exchange market. On light there was a micro structural approach to a currency exchange rate (microstructure approach to exchange rate) as which ancestor it is possible to consider R.Lionsa, the professor of the Californian University (Berkeley).

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