OTC Discount

• 成果类型: Article; Early Access
• 署名作者: de Roure, Calebe; Moench, Emanuel; Pelizzon, Loriana; Schneider, Michael
• 署名单位: Reserve Bank of Australia; Frankfurt School Finance & Management; Goethe University Frankfurt; Universita Ca Foscari Venezia; Deutsche Bundesbank
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2022.00194
• 发表日期: 2025
• 关键词: Market microstructure; hybrid markets; venue choice; interdealer brokerage; Fixed income; OTC markets; search frictions; information frictions

摘要

We document a pecking order of transaction costs in the interdealer market for German sovereign bonds, where three trading protocols coexist. Dealers can trade over the counter (OTC), either bilaterally or via brokers, as well as on an exchange. Trading on the exchange is more expensive than OTC, and broker-intermediated trades are more costly than bilateral OTC trades. The existence of an OTC discount is difficult to square with theories centered around search-and-bargaining frictions but is in line with models of hybrid markets based on information frictions. Consistently, we show that dealers' information impacts their choice of trading protocol and that the pecking order of transaction costs is aligned with the informational content of order flows across protocols. Search and bargaining as well as information proxies explain differences in OTC discount within protocols. A realistic description of hybrid markets thus requires both types of frictions.