Do we need dealers in OTC markets?

Terrence Hendershott, Dmitry Livdan and Norman Schürhoff
Additional contact information
Terrence Hendershott: University of California, Berkeley - Haas School of Business
Norman Schürhoff: University of Lausanne; Swiss Finance Institute; Centre for Economic Policy Research (CEPR)
Authors registered in the RePEc Author Service: Norman Schuerhoff

No 21-43, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We examine technology enabling dispersed investors to directly trade with each other in over-the-counter markets via the largest electronic trading platform in corporate bonds starting Open Trading (OT) to allow investor-to-investor trading. Over our six-year sample, OT steadily grew to win 12% of trades on the platform, with 2% being investor-to-investor trading, 3% being dealers trading with new clients, and 7% being new liquidity providers acting like dealers. This suggests that investors in corporate bonds prefer intermediation to direct trade. However, OT can enable new dealers to compete in liquidity provision. OT's steady growth facilitates measuring its effect on investors, dealers, and competition to provide liquidity using an auction model.

Keywords: Over-the-counter markets; electronic trading; request for quote; open trading; corporate bonds; dealers (search for similar items in EconPapers)
JEL-codes: G12 G14 G19 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2021-07
New Economics Papers: this item is included in nep-cwa, nep-isf and nep-mst
References: Add references at CitEc
Citations:

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3895270 (application/pdf)

Related works:
Working Paper: Do we need dealers in OTC markets? (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2143

Access Statistics for this paper

More papers in Swiss Finance Institute Research Paper Series from Swiss Finance Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal ().