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Transparency Matters

其他書名	Price Formation in Presence of Order Preferencing
出版	SSRN, 2014
URL	http://books.google.com.hk/books?id=A9bMzgEACAAJ&hl=&source=gbs_api

註釋Using a market-making inventory model, we analyze the impact of order preferencing on dealers'quoting behavior by changing the degree of quote disclosure. We find that preferenced orders raise the inventory-holding costs of preferenced dealers, making them less able to post attractive quotes. In turn, competitors choose less aggressive prices, but still attract more likely public orders. Price competition is smoothed and expected market spreads widen. Promoting competition might be, however, enforced by (i) fine tuning through the degree of market transparency, (ii) favoring the entry of unpreferenced dealers, or (iii) requiring preferenced market-makers to have more funding capital.