Dealer Networks

• 成果类型: Article
• 署名作者: Li, Dan; Schurhoff, Norman
• 署名单位: Federal Reserve System - USA; University of Lausanne; University of Lausanne; Swiss Finance Institute (SFI); Center for Economic & Policy Research (CEPR)
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12728
• 发表日期: 2019
• 页码: 91-144
• 关键词: trading costs; MARKET; liquidity; search; TRANSPARENCY

摘要

Dealers in the over-the-counter municipal bond market form trading networks with other dealers to mitigate search frictions. Regulatory data show that this network has a core-periphery structure with 10 to 30 hubs and over 2,000 peripheral broker-dealers in which bonds flow from periphery to core and partially back. Central dealers charge investors up to double the round-trip markups compared to peripheral dealers. In turn, central dealers provide immediacy by matching buyers with sellers more directly and prearranging fewer trades, especially during stress times. Investors thus face a trade-off between execution cost and speed, consistent with network models of decentralized trade.