Over-the-Counter versus Limit-Order Markets: The Role of Traders' Expertise

• 成果类型: Article
• 署名作者: Glode, Vincent; Opp, Christian C.
• 署名单位: University of Pennsylvania
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhz061
• 发表日期: 2020
• 页码: 866
• 关键词: Auctions; price; INFORMATION; liquidity; equilibrium; PRIVATE; volume; ask

摘要

Over-the-counter (OTC) markets attract substantial trading volume despite exhibiting frictions absent in centralized limit-order markets. We compare the efficiency of OTC and limit-order markets when traders' expertise is endogenous. We show that asymmetric access to counterparties in OTC markets yields increased rents from expertise acquisition for a few well-connected core traders. When the existence of gains to trade is uncertain, traders' higher expertise in OTC markets can improve allocative efficiency. In contrast, when expertise primarily causes adverse selection, competitive limit-order markets tend to dominate. Our model provides guidance for policy makers and empiricists evaluating the efficiency of market structures.