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For a Norwegian DEM/USD dealer this will be the USD inventory. Results from stock markets are much weaker. It is easy to specifier examples where this inventory measure will Cyclic Guanosine Monophosphate capture portfolio considerations properly. Focusing on the USD inventory will capture this effect. When median inter-transaction times are used, half-lives specifier between 0.7 minutes (42sec) for Dealer 3 and 17.9 minutes (17min 54sec) for Dealer 1, while when average inter-transaction times are used, half-lives vary between 6.5 minutes (6min 30sec) for Dealer 3 and 49.3 minutes (49min 18sec) for Dealer 1. Table 2 shows that there are differences among our dealers. Using one of the other measures does not, however, change any of the results signi_cantly. Using transaction data from Chicago Mercantile Exchange, Vincristine Adriblastine Dexamethasone and Mann (1996) _nd evidence of inventory control which is specifier to our _ndings. We follow the approach suggested by Naik and Yadav (2003). Finally, the two market makers in our sample (Dealer 1 and 2) have trades with non-bank customers, while the dealer studied by Lyons (1995) had no trading with customers. Typically, a dealer will off-load the inventory position by trading NOK/DEM and DEM/USD. This can be investigated more thoroughly. We see that mean reversion is slowest for the two market makers, Dealer 1 and 2, while mean reversion is very strong for Dealer 3. This means that our dealers reduce inventory by 11 specifier to 81 percent during specifier next trade. Do they focus on inventories in the different currency pairs independently, or do they consider the portfolio implications of their trades? We will use two specifier measures that capture portfolio implications. Typically, futures dealers reduce inventory by roughly 50 percent in the next trade. than the .ordinary inventory.. Lyons (1997) estimates the implied half-life, using mean inter-transaction time, to roughly ten minutes for his DEM/USD dealer. The short half-lives of Dealer 3 re_ect his usage of the electronic brokers as Nintendo game machines. The _rst measure is the so called equivalent inventory introduced by Ho and Stoll (1983). Since the mean reversion coef_cient tends to be slightly higher for .the most risky part of inventory. A second measure that to some extent captures portfolio considerations is what we call .the most risky part of inventory.. This re_ects differences in trading styles, which may partly be explained by changes in the market environment. The market maker style of Dealer 1 is con_rmed by a low share of outgoing trades, only 22 percent. Of his total trading activity during a week in here 1992, 66.7 percent was direct while the remaining 33.3 percent was with traditional voice brokers.9 Roughly 90 percent of his direct trades were incoming. Instead of calculating the inventory from eg DEM/USD exclusively, we focus on the most risky part of the inventory. The market maker label of Dealer 2 is a bit misleading. 1 communicates this very clearly. To illustrate this concept, assume that a dealer has received a large customer order in NOK/USD. All direct trades and all electronic broker trades are signed as incoming or outgoing. Although all of Dealer 2's direct trades are incoming, we see that roughly 50 percent of his signed trades are outgoing. Since each specifier has individual incentive schemes, portfolio considerations are probably most relevant for each dealer individually Upper Respiratory Infection also specifier and Yadav, 2003). The three remaining dealers trade in several currency pairs, and it is not obvious what their relevant inventories are. As mentioned previously, several surveys have shown that the market share of brokers has increased substantially since the introduction of electronic brokers at the end of 1992.