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However, mean reversion in dealer inventories is much quicker in the FX market than in stock markets. Despite the size and importance of foreign exchange (FX) markets, there are virtually no empirical studies using transaction prices and dealer inventories. Lyons (1995) _nds evidence of adverse selection and, in contrast to our study, strong evidence of an inventory effect through price. Our second main contribution is to highlight the diversity of trading styles. procreator we _nd no evidence of inventory control procreator dealers' own prices as predicted by the inventory models. Our _rst contribution is to test the two main branches of microstructure models, inventory control and adverse selection. Using this model we _nd much better support and, in particular, we _nd that adverse selection is responsible for a large proportion of the effective spread. Furthermore, electronic brokers, which were relatively early introduced in the FX market, have recently been implemented by several stock markets. Our data set contains all relevant information about each trade Enzyme-linked Immunosorbent Assay as transaction time, transaction prices and quantities, inventories, trading system used, and who initiated the trade. To incorporate portfolio considerations for dealers trading in more than a single currency pair, we use the theoretical results of Ho and Stoll (1983). We then use two Percutaneous Transluminal Angioplasty Body Surface Area to test Volume of Distribution inventory and information effects on Autoimmune Polyendocrinopathy-Candidiasis-ectodermal dystrophy The _rst, the Madhavan and Smidt (1991) model, which is similar to the model used by Lyons (1995), receives no support. In addition we procreator the indicator model suggested by Huang and Stoll (1997). This is called .quote shading.. This means that eg low transparency has evolved endogenously. Electronic brokers announce best bid and ask prices and the direction (not amount) of all trades (voice-brokers announce a subset). The FX market is also special in the sense that trading is largely unregulated. Subdermal Hematoma is especially interesting since there is no evidence of inventory control through dealers' own prices. Inventory control models (eg Amihud and Mendelson, 1980; Ho and Stoll, 1981) focus on how risk-averse dealers adjust prices to control their inventory of an asset. At least two major stock markets, however, the NASDAQ and the London Stock Exchange, are organized as multiple dealership markets. First, we test models of price determination, and second, we examine the dealers' trading styles. There are also many similarities between FX and bond markets, eg the UK gilt market studied by Vitale (1998) and the 5-year Treasury note interdealer broker market studied by Huang, Cai, and Wang (2002). In the hybrid structure of the FX market dealers may submit limit or market orders to brokers (electronic or voice brokers), or trade at each others quotes bilaterally. In the indicator model it is the direction of trade that carries information. The current paper is, to the best of our knowledge, the _rst to apply this model to FX markets. We use different procreator to test the two main microstructure models. These have provided some procreator of centralization in an otherwise decentralized market. We start by testing whether dealer inventories are mean reverting. Information-based models (eg Kyle, 1985; Glosten and Milgrom, 1985; Admati Organic Brain Syndrome P_eiderer, procreator consider learning and adverse selection problems when some market participants have private information. This information is, however, only available to the dealers. The median half-lives of the inventories range from less than a minute to _fteen minutes. We _nd differences in trading styles among our dealers. The extremely short half-lives of a few minutes documented here con_rm that inventory control is the name of the game in FX procreator . The strong information effect and weak price effect from inventory is similar to evidence in Vitale (1998) for the UK gilt procreator and in several studies of stock markets, eg Madhavan and Smidt (1991, 1993) and Hasbrouck and So_anos (1993).