Abstract
This article seeks to examine the intraday functioning of the interbank foreign exchange spot market of the Polish zloty using a unique set of very detailed data from the Reuters Dealing 3000 Spot Matching System for the year of 2007. Using the sequential trade model of Easley et al. (2008), we can differentiate between the time-varying patterns of strategic behaviour carried out by informed and uninformed (liquidity) traders. These conditional arrival rates for both trade categories can be used to forecast a time-varying probability of informed trading (PIN). We show that the predictions for PIN, as measures of information heterogeneity, influence the scale of impact that the order flow exerts on FX rate changes.
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