Electronic trading has transformed foreign exchange markets over the past decade, and the pace of innovation only accelerates. This formerly opaque market is now fairly transparent and transaction costs are only a fraction of their former level. Entirely new agents have joined the fray,...

Research on foreign exchange market microstructure stresses the importance of order flow, heterogeneity among agents, and private information as crucial determinants of short-run exchange rate dynamics. Microstructure researchers have produced empirically-driven models that fit the data...

This paper examines the relation between the Canadian dollar / US dollar (CAD) exchange rate and foreign exchange order flow employing a novel data set on CAD order flow over the period 1994-2005. We investigate empirically the predictive information content and the determinants of order flow....