Augmenting Markets with Mechanisms

Samuel Antill and Darrell Duffie

No 24146, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We explain how the common practice of size-discovery trade detracts from overall financial market efficiency. At each of a series of size-discovery sessions, traders report their desired trades, generating allocations of the asset and cash that rely on the most recent exchange price. Traders can thus mitigate exchange price impacts by waiting for size-discovery sessions. This waiting causes socially costly delays in the rebalancing of asset positions across traders. As the frequency of size-discovery sessions is increased, exchange market depth is further lowered by the traders' reduced incentive to bid aggressively on the exchange, further delaying the rebalancing of positions, and more than offsetting the gains from trade that occur at each of the size-discovery sessions.

JEL-codes: D47 D82 G14 (search for similar items in EconPapers)
Date: 2017-12
New Economics Papers: this item is included in nep-des and nep-exp
Note: AP
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Citations: View citations in EconPapers (1)

Published as Samuel Antill & Darrell Duffie, 2021. "Augmenting Markets with Mechanisms," The Review of Economic Studies, vol 88(4), pages 1665-1719.

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Related works:
Journal Article: Augmenting Markets with Mechanisms (2021)
Working Paper: Augmenting Markets with Mechanisms (2018)
Working Paper: Augmenting Markets with Mechanisms (2017)
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