The Determinants of Execution Costs in Short-Term Money Markets

19 Pages Posted: 11 Jul 2011

See all articles by Alex Frino

Alex Frino

The University of Sydney - Discipline of Finance; Financial Research Network (FIRN)

Jennifer Kruk

affiliation not provided to SSRN

Andrew Lepone

University of Sydney; Financial Research Network (FIRN)

Date Written: August 2011

Abstract

Prior research attributes the observed negative relation between execution costs and trade size in opaque markets to two factors - information asymmetry and broker‐client relationships. We provide evidence that a trader's ex ante transaction price information and the relationship traders have with their brokers are both significant determinants of a trader's execution costs in an opaque market; however, traders who establish strong relationships with their brokers will achieve a greater reduction in execution costs than traders with ex ante transaction price information. We also find evidence that trade size has little explanatory power after controlling for a trader's ex ante transaction price information and broker‐client relationships.

Keywords: execution costs, opaque markets, information asymmetry, broker‐client relationships, G14, G15

Suggested Citation

Frino, Alex and Kruk, Jennifer and Lepone, Andrew, The Determinants of Execution Costs in Short-Term Money Markets (August 2011). Financial Review, Vol. 46, Issue 3, pp. 337-355, 2011, Available at SSRN: https://ssrn.com/abstract=1882144 or http://dx.doi.org/10.1111/j.1540-6288.2011.00303.x

Alex Frino (Contact Author)

The University of Sydney - Discipline of Finance ( email )

Futures Research Centre
P.O. Box H58
Sydney NSW
Australia
+61 2 9299 1809 (Phone)
+61 2 9299 1830 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Jennifer Kruk

affiliation not provided to SSRN

Andrew Lepone

University of Sydney ( email )

University of Sydney
Sydney NSW 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
3
Abstract Views
412
PlumX Metrics