Imperfect Market Monitoring and SOES Trading
| Autor: | Foucault, Thierry, Roell, Ailsa, Sandas, Patrik |
|---|---|
| Přispěvatelé: | Haldemann, Antoine, Groupement de Recherche et d'Etudes en Gestion à HEC (GREGH), Ecole des Hautes Etudes Commerciales (HEC Paris)-Centre National de la Recherche Scientifique (CNRS), Department of economics, Princeton University, University of Pennsylvania [Philadelphia] |
| Rok vydání: | 1999 |
| Předmět: |
[SHS.GESTION.FIN] Humanities and Social Sciences/Business administration/domain_shs.gestion.fin
Monitoring jel:C53 jel:E30 [SHS.GESTION.FIN]Humanities and Social Sciences/Business administration/domain_shs.gestion.fin SOES jel:G24 jel:G10 monitoring bid-ask spread automatic execution SOES trading Automatic Execution Bid-Ask Spread jel:G14 jel:L13 |
| Popis: | Cahier de Recherche du Groupe HEC Paris, n° 671/1999 et CEPR Discussion Series, n° 2265; We develop a model of price formation in a dealership market where monitoring of the information flow requires costly effort. The result is imperfect monitoring, which creates profit opportunities for speculators, who do not act as dealers but simply monitor the information flow and quote updates in order to pick off stale quotes. Externalities associated with monitoring can help to sustain non-competitive spreads. We show that protecting dealers against the execution of stale quotes can result in larger spreads and be detrimental to price discovery due to externalities in monitoring. A reduction in the minimum quoted depth will reduce the spread and speculators' trading frequency. Our analysis is relevant for the SOES debate given that the behavior of speculators in our model is very similar to the alleged behavior of the real world SOES bandits. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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