Working Paper: NBER ID: w31904
Authors: Mahyar Kargar; Benjamin Lester; Sébastien Plante; Pierre-Olivier Weill
Abstract: In over-the-counter (OTC) markets, customers search for counterparties. Little is known about this process, however, because existing data is comprised of transaction records, which are only informative about the end of a successful search. Leveraging data from the leading trading platform for corporate bonds, we offer evidence about the search process: we analyze customers’ repeated attempts to trade (successful and unsuccessful). We estimate that it takes two to three days to complete a transaction after an unsuccessful attempt, with substantial variation depending on trade and customer characteristics. Our analysis offers insights into the sources of trading delays in OTC markets.
Keywords: Corporate Bonds; OTC Markets; Trading Delays; Search Process
JEL Codes: D83; G10; G12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| number of inquiries (G24) | likelihood of completing a trade (F19) |
| trade size (F19) | time-to-trade (F16) |
| trade direction (F10) | time-to-trade (F16) |
| connectedness (F60) | time-to-trade (F16) |
| additional inquiry (C99) | average spread improvement (C43) |
| dealer inventory levels (L81) | quality of offers (L15) |