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Inter-dealer trading in financial markets

Publication ,  Journal Article
Viswanathan, S; Wang, JJD
Published in: Journal of Business
October 1, 2004

We compare the following multi-stage inter-dealer trading mechanisms: a one-shot uniform-price auction, a sequence of unit auctions (sequential auctions), and a limit-order book. With uninformative customer orders, sequential auctions are revenue-preferred because winning dealers in earlier stages restrict quantity in subsequent auctions so as to raise the price. Since winning dealers make higher profits, dealers compete aggressively, thus yielding higher customer revenue. With informative customer orders, winning dealers use their private information in subsequent trading, reducing liquidity. Sequential trading breaks down when the customer order flow is too informative, while the limit-order book is robust and yields higher revenues. © 2004 by The University of Chicago. All rights reserved.

Duke Scholars

Published In

Journal of Business

DOI

ISSN

0021-9398

Publication Date

October 1, 2004

Volume

77

Issue

4

Start / End Page

987 / 1040

Related Subject Headings

  • Finance
 

Citation

APA
Chicago
ICMJE
MLA
NLM
Viswanathan, S., & Wang, J. J. D. (2004). Inter-dealer trading in financial markets. Journal of Business, 77(4), 987–1040. https://doi.org/10.1086/422631
Viswanathan, S., and J. J. D. Wang. “Inter-dealer trading in financial markets.” Journal of Business 77, no. 4 (October 1, 2004): 987–1040. https://doi.org/10.1086/422631.
Viswanathan S, Wang JJD. Inter-dealer trading in financial markets. Journal of Business. 2004 Oct 1;77(4):987–1040.
Viswanathan, S., and J. J. D. Wang. “Inter-dealer trading in financial markets.” Journal of Business, vol. 77, no. 4, Oct. 2004, pp. 987–1040. Scopus, doi:10.1086/422631.
Viswanathan S, Wang JJD. Inter-dealer trading in financial markets. Journal of Business. 2004 Oct 1;77(4):987–1040.

Published In

Journal of Business

DOI

ISSN

0021-9398

Publication Date

October 1, 2004

Volume

77

Issue

4

Start / End Page

987 / 1040

Related Subject Headings

  • Finance