Who sees the trades? The effect of information on liquidity in inter-dealer markets

Arbeitspapier

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.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Staff Report ; No. 892

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Externalities ; Asymmetric and Private Information; Mechanism Design ; Information and Market Efficiency; Event Studies; Insider Trading ; Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors
• Thema: inter-dealer markets ; liquidity ; information design ; platforms

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Garratt, Rod ; Lee, Michael Junho ; Martin, Antoine ; Townsend, Robert M.
• Ereignis: Veröffentlichung
• (wer): Federal Reserve Bank of New York
• (wo): New York, NY
• (wann): 2019

Weitere Informationen

• Handle: http://hdl.handle.net/10419/210744
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ