OTC discount

Arbeitspapier

We document a sizable OTC discount in the interdealer market for German sovereign bonds where exchange and over-the-counter trading coexist: the vast majority of OTC prices are favorable compared to exchange quotes. This is a challenge for theories of OTC markets centered around search-and-bargaining frictions but consistent with models of hybrid markets based on information frictions. We find support for this explanation. Distinguishing between bilateral and broker-intermediated OTC trades, differences in OTC discount across protocols are consistent with their relative informedness. Within each protocol, the difference in OTC discount is explained not only by information but also by search-and-bargaining frictions.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SAFE Working Paper ; No. 298

Classification and Topics

• Classification: Wirtschaft ; Market Design ; Information and Market Efficiency; Event Studies; Insider Trading ; Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies
• Subject: Market Microstructure ; Hybrid Markets ; Venue Choice ; Interdealer Brokerage ; Fixed-Income ; OTC Markets ; Search Frictions ; Information Frictions

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): de Roure, Calebe ; Mönch, Emanuel ; Pelizzon, Loriana ; Schneider, Michael
• Event: Veröffentlichung
• (who): Leibniz Institute for Financial Research SAFE
• (where): Frankfurt a. M.
• (when): 2021

Further information

• DOI: doi:10.2139/ssrn.3744758
• Handle: http://hdl.handle.net/10419/243278
• Last update: 10.03.2025, 11:43 AM CET