Inter-Dealer Trades in OTC Markets - Who Buys and Who Sells?

Chung-Yi Tse and Yujing Xu
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Yujing Xu: University of Hong Kong

Review of Economic Dynamics, 2021, vol. 39, 220-257

Abstract: In an OTC market where dealers' inventory capacities differ, dealers trade among themselves to rebalance inventories for facilitating the sale and purchase of the asset to and from their investor clients. In a market where the asset is sold quickly, the small-capacity dealers sell to the large-capacity dealers to help them replenish their inventories. Conversely, in a slow market where it takes a relatively long time for the asset to be sold, the small-capacity dealers buy from the large-capacity dealers to help them free up inventory capacities. The prediction, though counterintuitive, is supported by some available empirical evidence. (Copyright: Elsevier)

Keywords: OTC Market; Inter-Dealer Trades; Dealers' Inventories (search for similar items in EconPapers)
JEL-codes: D53 D85 G23 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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DOI: 10.1016/j.red.2020.07.003

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