Swap trading after Dodd-Frank: Evidence from index CDS

• 成果类型: Article
• 署名作者: Riggs, Lynn; Onur, Esen; Reiffen, David; Zhu, Haoxiang
• 署名单位: Massachusetts Institute of Technology (MIT); National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2020.03.008
• 发表日期: 2020
• 关键词: Dodd-Frank Act; OTC derivatives; Swaps; Swap execution facility; Request for quotes; auction; COMPETITION; Winner's curse; Relationship

摘要

The Dodd-Frank Act mandates that certain standard over-the-counter (OTC) derivatives must be traded on swap execution facilities (SEFs). Using message-level data, we provide a granular analysis of dealers' and customers' trading behavior on the two largest dealer-to-customer SEFs for index credit default swaps (CDS). On average, a typical customer contacts few dealers when seeking liquidity. A theoretical model shows that the benefit of competition through wider order exposure is mitigated by a winner's curse problem and dealer-customer relationships. Consistent with the model, we find that order size, market conditions, and customer-dealer relationships are important empirical determinants of customers' choice of trading mechanism and dealers' liquidity provision. (C) 2020 Elsevier B.V. All rights reserved.