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Mr. Ian Domowitz
Automated trade execution systems are examined with respect to the degree to which they automate the price discovery process. Seven levels of automation of price discovery are identified, and 47 systems are classified according to these criteria. Systems operating at various levels of automation are compared with respect to age, geographical location, and type of securities traded. Information provided to market participants, and asymmetries of information between traders with direct access to the automated market and outside investors also are examined. It is found, for example, that the degree of asymmetric information increases with the level of automation of price discovery. The potential for trading abuses related to prearranged trading, noncompetitive execution, and trading ahead of customers is analyzed for each level of automation. Certain levels of automation widen the opportunities for trading abuses in some respects, but may narrow them in others.
Mr. Ian Domowitz

completely endogenize the price discovery process may exhibit lower price volatility and smaller spreads than an automated continuous market with an electronic book. Within a particular class of continuous automated markets, Domowitz, 1992b indicates that tradeoffs in market efficiency measures exist between systems limited to orders at the best price only and those that use electronic books that represent bids and offers at all possible prices. Even automated trade matching systems, which lack an automated price discovery mechanism, affect trader welfare and market

market conditions, in line with the de jure managed float regime. Staff continues to support Myanmar’s managed float exchange rate regime, which has helped to mitigate terms of trade shocks with limited foreign reserves. In order for the exchange rate regime to fulfill this important role, the CBM needs to conduct the daily FX auction in a manner to serve as a price discovery mechanism, rather than a signaling device (Box 4). Specifically, the cut-off rate, or the reference rate, at the auction must reflect demand and supply conditions in the broad, deep parallel

Mr. Ian Domowitz
A taxonomy of existing and planned automated trade execution systems in financial markets is provided. Over 50 automated market structures in 16 countries are analyzed. The classification scheme is organized around the principle that such markets consist of an algorithm that performs a trade matching function, together with information display and transmission mechanisms. Automated market structures are classified by ordered sets of trade execution priority rules, trade matching protocols and associated degree of automation of price discovery, and transparency, to include informational asymmetries between classes of market participants. Systematic differences in systems across types of financial instruments, geographical market centers, and over time are analyzed.
International Monetary Fund
Effective liquidity management is important to promote macro-financial stability in the GCC countries. Fixed exchange rate regimes provide credible nominal anchors in the GCC countries, but combined with open capital accounts, they also entail limited monetary policy independence. At the same time, high dependence on hydrocarbon revenue has made the region vulnerable to oil price-driven liquidity swings. And the latter can affect monetary policy implementation, including by exacerbating credit and asset price cycles. This highlights the importance of frameworks aimed at forecasting liquidity and ensuring appropriate liquidity levels through the timely absorption or injection of liquidity by central banks. Over the past decade, liquidity management in the GCC countries has been based mainly on passive instruments. Abundant liquidity during times of high oil prices have placed liquidity absorption at the center of the central bank operations. Reserve requirements have helped absorb liquidity but have not been used very actively. Standing facilities, another key instrument, are more passive in nature, with the amount of liquidity absorbed or injected driven by banks rather than monetary authorities. Central banks bills or other instruments have also been used, but issuance has not systematically been based on market principles. In addition, these operations have been constrained by limited liquidity forecasting capability and the shallow nature of interbank and domestic debt markets.