According to Ito and Hashimoto (200

According to Ito and Hashimoto (2006) ‘the overwhelming majority of the spot foreign exchanges are now transacted through the global electronic brokerage system – the EBS and Reuters D3000’. It is interesting to examine the issue of the intraday seasonality of the bid–ask spreads and the relationship between the spreads and volatility of 15-minute JPY/USD exchange rates in the EBS electronic brokerage system data over the period from 1 January 2003 to 31 December 2005 by using a sophisticated tool – the Periodic-Generalized Autoregressive Conditional Heteroscedastic (P-GARCH) model. The P-GARCH model allows us to measure seasonal variations in all parameter shifts from one state to other possible states as well as the magnitude of the trading activity and volatility effects on spreads forthe states representing the openness and closeness of the market.