The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
The Outreach & Education function engages, empowers and educates the public in the Second District. Our outreach mission furthers the Bank’s commitment to the region by listening to the communities we serve and developing programs, analysis and sponsored conferences and clinics to help meet their needs. Our education mission aims to advance public knowledge about the Federal Reserve System and its role in the economy.
We assess the microstructure of a U.S. Treasury electronic communications network (ECN) and show that limit orders as well as trades affect prices, with greater effects following announcements by the Federal Open Market Committee. We also find that use of iceberg orders, a form of hidden liquidity, is less common than in equity markets. Using logistic regression, we find support for the hypothesis that iceberg orders are used to prevent information leakage and mitigate adverse selection risk. However, volatility and iceberg order use are negatively linked, likely reflecting market participants’ preference for an alternative channel of hidden liquidity that gives them greater control over order exposure and execution.