A Theory of Participation in OTC and Centralized Markets

• 成果类型: Article
• 署名作者: Dugast, Jerome; Uslu, Semih; Weill, Pierre-Olivier
• 署名单位: Centre National de la Recherche Scientifique (CNRS); Universite PSL; Universite Paris-Dauphine; Johns Hopkins University; University of California System; University of California Los Angeles; National Bureau of Economic Research; Centre for Economic Policy Research - UK
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdac010
• 发表日期: 2022
• 页码: 3223-3266
• 关键词: search model; liquidity; auctions; entry

摘要

Should regulators encourage the migration of trade from over-the-counter (OTC) to centralized markets? To address this question, we study a model in which banks make costly decisions to participate in an OTC market, a centralized market, or both markets at the same time. Banks differ in their ability to take large positions, what we call their trading capacity. In equilibrium, intermediate-capacity banks find it optimal to participate in the centralized market. In contrast, low- and high-capacity banks find it optimal to participate in the OTC market, due to an endogenous complementarity. Namely, low-capacity banks receive worse terms of trade than in the centralized market but better risk sharing, thanks to the intermediation services offered by high-capacity banks. High-capacity banks receive worse risk sharing than in the centralized market, but profit from the provision of intermediation services to low-capacity banks. While the social optimum has qualitatively similar participation patterns, it prescribes that more customers migrate to the centralized market, and that more dealers enter the OTC market.