Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/206945 
Year of Publication: 
2019
Series/Report no.: 
Deutsche Bundesbank Discussion Paper No. 42/2019
Publisher: 
Deutsche Bundesbank, Frankfurt a. M.
Abstract: 
We study price dispersion and venue choice in the interdealer market for German sovereign bonds, where an exchange and over-the-counter segments coexist. We show that 85% of OTC traded prices are favorable with respect to exchange quotes, indicating the prevalence of an OTC discount. This discount is sizeable and driven by both search and information frictions. More than 75% of volume is transacted via interdealer brokers in trades that are larger, have less price impact, and less discount than comparable bilateral OTC trades. Dealers trade on the exchange for immediacy, highlighting the complementary roles played by the different segments.
Subjects: 
Market Microstructure
Hybrid Markets
Venue Choice
Interdealer Brokerage
Fixed-Income
OTC Markets
Intermediation Frictions
Search Frictions
Information Frictions
JEL: 
D4
D47
G1
G14
G24
ISBN: 
978-3-95729-643-6
Document Type: 
Working Paper

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