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Who sees the trades?: the effect of information on liquidity in inter-dealer markets
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| Authors and Corporations: | , , , |
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| Other Authors: | Lee, Michael Junho [Author] • Martin, Antoine [Author] • Townsend, Robert M. 1948- [Author] |
| Type of Resource: | E-Book |
| Language: | English |
| published: | |
| Series: |
Federal Reserve Bank of New York: Staff reports ; no. 892 (July 2019)
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| Source: | Verbunddaten SWB Lizenzfreie Online-Ressourcen |
| Summary: | Dealers, who strategically supply liquidity to traders, are subject to both liquidity and adverse selection costs. While liquidity costs can be mitigated through inter-dealer trading, individual dealers' private motives to acquire information compromise inter-dealer market liquidity. Post-trade information disclosure can improve market liquidity by counteracting dealers' incentives to become better informed through their market-making activities. Asymmetric disclosure, however, exacerbates the adverse selection problem in inter-dealer markets, in turn decreasing equilibrium liquidity provision. A non-monotonic relationship may arise between the partial release of post-trade information and market liquidity. This points to a practical concern: a strategic post-trade platform has incentives to maximize adverse selection and may choose to release information in a way that minimizes equilibrium liquidity provision. |
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| Physical Description: | 1 Online-Ressource (circa 51 Seiten); Illustrationen |