Agents' Behavior on Multi-Dealer-to-Client Bond Trading Platforms

Jean-David Fermanian (jean-david.fermanian@ensae.fr), Olivier Guéant and Arnaud Rachez (arnaud.rachez@gmail.com)
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Jean-David Fermanian: CREST, Laboratoire de Finance et d’Assurance

No 2015-11, Working Papers from Center for Research in Economics and Statistics

Abstract: For the last two decades, most nancial markets have undergone an evolution toward electroni cation. The market for corporate bonds is one of the last ma jor nancial markets to follow this unavoidable path. Traditionally quote-driven (that is, dealer-driven) rather than order-driven, the market for corporate bonds is still mainly dominated by voice trading, but a lot of electronic platforms have emerged that make it possible for buy-side agents to simultaneously request several dealers for quotes, or even directly trade with other buy-siders. The research presented in this article is based on a large proprietary database of requests for quotes (RFQ) sent, through the multi-dealer-to-client (MD2C) platforms operated by Bloomberg Fixed Income Trading and Tradeweb, to one of the ma jor liquidity providers in European corporate bonds. Our goal is (i) to model the RFQ process on these platforms and the resulting competition between dealers, (ii) to use the RFQ database in order to implicit from our model the behavior of both dealers and clients on MD2C platforms, and (iii) to study the in uence of several bond characteristics on the behavior of market participants.

Pages: 41
Date: 2015-12
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Citations: View citations in EconPapers (2)

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