BIBLIOTECA MANUEL BELGRANO - Facultad de Ciencias Económicas - UNC

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Financial intermediation and the role of price discrimination in a two-tier market / Stefan Reitz, Markus A. Schmidt, Mark P. Taylor.

Por: Colaborador(es): Tipo de material: TextoTextoSeries Discussion paper (Deutsche Bundesbank). Series 1: economic studies ; no. 13/2009Detalles de publicación: Frankfurt am Main : Deutsche Bundesbank, 2009Descripción: 27 pISBN:
  • 9783865585202
Tema(s): Clasificación CDD:
  • 21 338.52
Recursos en línea: Resumen: Though unambiguously outperforming all other financial markets in terms of liquidity, foreign exchange trading is still performed in opaque and decentralized markets. In particular, the two-tier market structure consisting of a customer segment and an interdealer segment to which only market makers have access gives rise to the possibility of price discrimination. We provide a theoretical foreign exchange pricing model that accounts for market power considerations and analyze a database of the trades of a German market maker and his cross section of end-user customers. We find that the market maker generally exerts low bargaining power vis-á-vis his customers. The dealer earns lower average spreads on trades with financial customers than commercial customers, even though the former are perceived to convey exchange-rate-relevant information. From this perspective, it appears that market makers provide interdealer market liquidity to end-user customers with cross-sectionally differing spreads.
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Documento Documento Biblioteca Manuel Belgrano F 338.52 R 15687 (Navegar estantería(Abre debajo)) Disponible 15687 F

Bibliografía: p. 18-20.

Though unambiguously outperforming all other financial markets in terms of liquidity, foreign exchange trading is still performed in opaque and decentralized markets. In particular, the two-tier market structure consisting of a customer segment and an interdealer segment to which only market makers have access gives rise to the possibility of price discrimination. We provide a theoretical foreign exchange pricing model that accounts for market power considerations and analyze a database of the trades of a German market maker and his cross section of end-user customers. We find that the market maker generally exerts low bargaining power vis-á-vis his customers. The dealer earns lower average spreads on trades with financial customers than commercial customers, even though the former are perceived to convey exchange-rate-relevant information. From this perspective, it appears that market makers provide interdealer market liquidity to end-user customers with cross-sectionally differing spreads.

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