OTC discount

Calebe de Roure, Emanuel Moench, Loriana Pelizzon, Michael Schneider

We study price dispersion and venue choice in the interdealer market for German sovereign bonds, where an exchange and over-the-counter segments coexist. We show that 85% of OTC traded prices are favorable with respect to exchange quotes, indicating the prevalence of an OTC discount. This discount is sizeable and driven by both search and information frictions. More than 75% of volume is transacted via interdealer brokers in trades that are larger, have less price impact, and less discount than comparable bilateral OTC trades. Dealers trade on the exchange for immediacy, highlighting the complementary roles played by the different segments.

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Year of publication:	[2019]
Authors:	Roure, Calebe de ; Mönch, Emanuel ; Pelizzon, Loriana ; Schneider, Michael
Publisher:	Frankfurt am Main : Deutsche Bundesbank
Subject:	Market Microstructure \| Hybrid Markets \| Venue Choice \| Interdealer Brokerage \| Fixed-Income \| OTC Markets \| Intermediation Frictions \| Search Frictions \| Information Frictions \| OTC-Handel \| OTC market \| Suchtheorie \| Search theory \| Marktmikrostruktur \| Market microstructure \| Vermittlungstätigkeit \| Intermediation \| Informationskosten \| Information costs \| Unvollkommener Markt \| Incomplete market \| Wertpapierhandel \| Securities trading \| Börsenmakler \| Stockbrokers \| Matching

Extent:	1 Online-Ressource (circa 69 Seiten) Illustrationen
Series:	Discussion paper. - Frankfurt am Main : Deutsche Bundesbank, ISSN 2941-7503, ZDB-ID 2660941-1. - Vol. no 2019, 42
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Graue Literatur ; Non-commercial literature ; Arbeitspapier ; Working Paper
Language:	English
ISBN:	978-3-95729-643-6 ; 978-3-95729-642-9
Other identifiers:	hdl:10419/206945 [Handle]
Classification:	D4 - Market Structure and Pricing ; d47 ; G1 - General Financial Markets ; G14 - Information and Market Efficiency; Event Studies ; G24 - Investment Banking; Venture Capital; Brokerage
Source:	ECONIS - Online Catalogue of the ZBW

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