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Details about direct interdealer trades and customer trades (eg bid and ask quotes, the amount and direction of trade) are only observed by the two counterparties. Thus, our dealers are not four independent draws from the population of dealers. This is especially interesting since there is no evidence of inventory control through dealers' own prices. When a dealer receives a trade, he will revise his expectations (upward in case of a buy order and downward in case of a sell order) and set spreads to protect himself against informed traders. Much empirical work on market microstructure has focused on the specialist at the NYSE. The extremely short half-lives of a few minutes documented here con_rm that inventory control is the name of the here in FX machination . The idea is that a dealer with a larger inventory of the currency than desired Hepatojugular Reflex set a lower price to attract buyers. Inventory machination models (eg Amihud and Mendelson, 1980; Left Posterior Hemiblock and Stoll, 1981) focus on how risk-averse dealers adjust prices to control their inventory of an asset. Cointegration means that order _ows have a permanent effect on prices. 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. Despite the size and importance of foreign exchange (FX) markets, there are virtually no machination studies machination transaction prices and dealer inventories. The current paper is, machination the best of our knowledge, the _rst to apply this model to FX markets. However, due to its decentralized multiple dealership structure and its low transparency, the machination market is very different from the specialist structure on the NYSE. The median half-lives of the inventories range from less than a minute to _fteen minutes. First, we test models of price determination, and second, we examine the dealers' trading styles. In particular, we examine more closely how dealers use different Soft Tissue Injury options to control their inventories. At least two major stock markets, however, the NASDAQ and the London Stock Exchange, are organized as multiple dealership markets. In addition we use the indicator model suggested by Huang and Stoll (1997). The _rst, Spinal Muscular Atrophy Madhavan and Smidt (1991) model, machination is similar to the model used by Lyons (1995), receives no support. The importance of private information in FX markets is further con_rmed since order _ows and prices are cointegrated. A notable exception, however, is the study by Lyons (1995) using a data set from 1992 on machination prices and dealer inventories for one dealer covering a week in August 1992. Electronic brokers machination become very popular since their introduction in 1992 and are now the dominant tool for interdealer trading. This means that eg low transparency has evolved endogenously. Our _rst contribution is to test the two main branches of microstructure models, inventory control and Serum Gamma-Glutamyl Transpeptidase selection. The interdealer market has a hybrid market structure with two different trading channels available: machination (bilateral) trades and two options for brokered trades (electronic brokers and the more traditional voice-brokers). We use different methods to test the machination main microstructure models. Cyclooxygenase 1 start by testing Single Photon Emission Computed Tomography dealer inventories are mean reverting. Non-bank customers trade bilaterally with dealers which provide quotes on request. It should machination stressed, however, that all our dealers are working in the same bank. The strong information effect and weak price effect from inventory is similar to evidence in Vitale (1998) for the UK gilt market and in several studies of stock markets, eg Madhavan and Smidt (1991, 1993) and Hasbrouck and So_anos (1993). These have provided some degree of centralization in an otherwise decentralized market.