Swap trading after Dodd-Frank: Evidence from index CDS
The Dodd-Frank Act mandates that certain standard over-the-counter (OTC) derivatives must be traded on swap execution facilities (SEFs). Using message-level data, we provide a granular analysis of dealers’ and customers’ trading behavior on the two largest dealer-to-customer SEFs for index credit de...
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| Other Authors: | |
| Format: | Article |
| Language: | English |
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Elsevier BV
2021
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| Online Access: | https://hdl.handle.net/1721.1/130359 |
| _version_ | 1811083080914436096 |
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| author | Zhu, Haoxiang |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Zhu, Haoxiang |
| author_sort | Zhu, Haoxiang |
| collection | MIT |
| description | The Dodd-Frank Act mandates that certain standard over-the-counter (OTC) derivatives must be traded on swap execution facilities (SEFs). Using message-level data, we provide a granular analysis of dealers’ and customers’ trading behavior on the two largest dealer-to-customer SEFs for index credit default swaps (CDS). On average, a typical customer contacts few dealers when seeking liquidity. A theoretical model shows that the benefit of competition through wider order exposure is mitigated by a winner's curse problem and dealer-customer relationships. Consistent with the model, we find that order size, market conditions, and customer-dealer relationships are important empirical determinants of customers’ choice of trading mechanism and dealers’ liquidity provision. |
| first_indexed | 2024-09-23T12:20:40Z |
| format | Article |
| id | mit-1721.1/130359 |
| institution | Massachusetts Institute of Technology |
| language | English |
| last_indexed | 2024-09-23T12:20:40Z |
| publishDate | 2021 |
| publisher | Elsevier BV |
| record_format | dspace |
| spelling | mit-1721.1/1303592022-09-28T07:01:25Z Swap trading after Dodd-Frank: Evidence from index CDS Zhu, Haoxiang Sloan School of Management The Dodd-Frank Act mandates that certain standard over-the-counter (OTC) derivatives must be traded on swap execution facilities (SEFs). Using message-level data, we provide a granular analysis of dealers’ and customers’ trading behavior on the two largest dealer-to-customer SEFs for index credit default swaps (CDS). On average, a typical customer contacts few dealers when seeking liquidity. A theoretical model shows that the benefit of competition through wider order exposure is mitigated by a winner's curse problem and dealer-customer relationships. Consistent with the model, we find that order size, market conditions, and customer-dealer relationships are important empirical determinants of customers’ choice of trading mechanism and dealers’ liquidity provision. 2021-04-05T14:34:03Z 2021-04-05T14:34:03Z 2020-09 2021-04-01T15:36:19Z Article http://purl.org/eprint/type/JournalArticle 0304-405X https://hdl.handle.net/1721.1/130359 Riggs, Lynn et al. “Swap trading after Dodd-Frank: Evidence from index CDS.” Journal of Financial Economics, 137, 3 (September 2020): 857-886 © 2020 The Author(s) en 10.1016/J.JFINECO.2020.03.008 Journal of Financial Economics Creative Commons Attribution-NonCommercial-NoDerivs License http://creativecommons.org/licenses/by-nc-nd/4.0/ application/pdf Elsevier BV SSRN |
| spellingShingle | Zhu, Haoxiang Swap trading after Dodd-Frank: Evidence from index CDS |
| title | Swap trading after Dodd-Frank: Evidence from index CDS |
| title_full | Swap trading after Dodd-Frank: Evidence from index CDS |
| title_fullStr | Swap trading after Dodd-Frank: Evidence from index CDS |
| title_full_unstemmed | Swap trading after Dodd-Frank: Evidence from index CDS |
| title_short | Swap trading after Dodd-Frank: Evidence from index CDS |
| title_sort | swap trading after dodd frank evidence from index cds |
| url | https://hdl.handle.net/1721.1/130359 |
| work_keys_str_mv | AT zhuhaoxiang swaptradingafterdoddfrankevidencefromindexcds |