Discriminatory Pricing of Over-the-Counter Derivatives - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Discriminatory Pricing of Over-the-Counter Derivatives write by Hau Harald. This book was released on 2019-05-07. Discriminatory Pricing of Over-the-Counter Derivatives available in PDF, EPUB and Kindle. New regulatory data reveal extensive price discrimination against non-financial clients in the FX derivatives market. The client at the 90th percentile pays an effective spread of 0.5%, while the bottom quarter incur transaction costs of less than 0.02%. Consistent with models of search frictions in over-the-counter markets, dealers charge higher spreads to less sophisticated clients. However, price discrimination is eliminated when clients trade through multi-dealer request-for-quote platforms. We also document that dealers extract rents from captive clients and market opacity, but only for contracts negotiated bilaterally with unsophisticated clients.
Discriminatory Pricing of Over-the-counter Derivatives
Discriminatory Pricing of Over-the-counter Derivatives - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Discriminatory Pricing of Over-the-counter Derivatives write by Harald Hau. This book was released on 2017. Discriminatory Pricing of Over-the-counter Derivatives available in PDF, EPUB and Kindle. New regulatory data reveal extensive discriminatory pricing in the foreign exchange derivatives market, in which dealer-banks and their non-financial clients trade over-the-counter. After controlling for contract characteristics, dealer fixed effects, and market conditions, we find that the client at the 75th percentile of the spread distribution pays an average of 30 pips over the market mid-price, compared to competitive spreads of less than 2.5 pips paid by the bottom 25% of clients. Higher spreads are paid by less sophisticated clients. However, trades on multi-dealer request-for-quote platforms exhibit competitive spreads regardless of client sophistication, thereby eliminating discriminatory pricing.
Discriminatory Pricing of Over-the-Counter Derivatives
Discriminatory Pricing of Over-the-Counter Derivatives - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Discriminatory Pricing of Over-the-Counter Derivatives write by Harald Hau. This book was released on 2019-05-07. Discriminatory Pricing of Over-the-Counter Derivatives available in PDF, EPUB and Kindle. New regulatory data reveal extensive price discrimination against non-financial clients in the FX derivatives market. The client at the 90th percentile pays an effective spread of 0.5%, while the bottom quarter incur transaction costs of less than 0.02%. Consistent with models of search frictions in over-the-counter markets, dealers charge higher spreads to less sophisticated clients. However, price discrimination is eliminated when clients trade through multi-dealer request-for-quote platforms. We also document that dealers extract rents from captive clients and market opacity, but only for contracts negotiated bilaterally with unsophisticated clients.
Why Trade Over-the-Counter? When Investors Want Price Discrimination
Why Trade Over-the-Counter? When Investors Want Price Discrimination - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Why Trade Over-the-Counter? When Investors Want Price Discrimination write by Tomy Lee. This book was released on 2019. Why Trade Over-the-Counter? When Investors Want Price Discrimination available in PDF, EPUB and Kindle. Despite the availability of low-cost exchanges, over-the-counter (OTC) trading is pervasive for most assets. We explain the prevalence of OTC trading using a model of adverse selection, in which informed and uninformed investors choose to trade over-the-counter or on an exchange. OTC dealers' ability to price discriminate allows them to imperfectly cream-skim the uninformed investors from the exchange. Assets with a higher share of trades executed on exchanges are predicted to have wider bid-ask spreads on those exchanges, as supported by evidence from US stocks. Having an OTC market can reduce welfare while increasing total trade volume and decreasing average bid-ask spread. Specifically, for assets that are mostly traded over-the-counter (such as swaps and bonds), having the OTC market actually harms welfare. Our results justify recent policies that seek to end OTC trading in such assets.
Discrimatory Pricing of Over-the-counter Derivatives
Discrimatory Pricing of Over-the-counter Derivatives - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Discrimatory Pricing of Over-the-counter Derivatives write by Harald Hau. This book was released on 2017. Discrimatory Pricing of Over-the-counter Derivatives available in PDF, EPUB and Kindle.
