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A Theory of Participation in OTC and Centralized Markets

hal.structure.identifierDauphine Recherches en Management [DRM]
dc.contributor.authorDugast, Jérôme
hal.structure.identifier
dc.contributor.authorÜslü, Semih
hal.structure.identifierUniversity of California
dc.contributor.authorWeil, Pierre-Olivier
dc.date.accessioned2019-10-02T15:15:48Z
dc.date.available2019-10-02T15:15:48Z
dc.date.issued2019
dc.identifier.urihttps://basepub.dauphine.fr/handle/123456789/19973
dc.language.isoenen
dc.subjectAsset Pricingen
dc.subjectEconomic Fluctuationsen
dc.subjectGrowthen
dc.subjectMonetary Economicsen
dc.subject.ddc332en
dc.subject.classificationjelD.D5.D53en
dc.subject.classificationjelG.G1.G15en
dc.titleA Theory of Participation in OTC and Centralized Marketsen
dc.typeDocument de travail / Working paper
dc.description.abstractenShould regulators encourage the migration of trade from over-the-counter (OTC) to centralized markets?To address this question, we consider a model of equilibrium and socially optimal market participationof heterogeneous banks in an OTC market, in a centralized market, or in both markets at the sametime. We find that banks have the strongest private incentives to participate in the OTC market if theyhave the lowest risk-sharing needs and highest ability to take large positions. These banks endogenouslyassume the role of OTC market dealers. Other banks, with relatively higher risk-sharing needs andlower ability to take large positions, lie at the margin: they are indifferent between the centralizedmarket and the OTC market, where they endogenously assume the role of customers. We show thatmore customer bank participation in the centralized market can be welfare improving only if banksare mostly heterogeneous in their ability to take large positions in the OTC market, and if participationcosts induce banks to trade exclusively in one market. Empirical evidence suggests that these conditionsfor a welfare improvement are met.en
dc.publisher.nameNBER Working Papersen
dc.publisher.cityWashingtonen
dc.identifier.citationpages40en
dc.relation.ispartofseriestitleNBER Working Papersen
dc.identifier.urlsitehttps://doi.org/10.3386/w25887en
dc.contributor.countryeditoruniversityotherUNITED STATES
dc.subject.ddclabelBourse, Marchés financiersen
dc.identifier.citationdate2019
dc.description.ssrncandidatenonen
dc.description.halcandidateouien
dc.description.readershiprechercheen
dc.description.audienceInternationalen
dc.date.updated2019-10-02T12:48:00Z
hal.identifierhal-02303959*
hal.version1*
hal.author.functionaut
hal.author.functionaut
hal.author.functionaut


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