Simultaneous Multilateral Search

52 Pages Posted: 6 Jun 2019 Last revised: 15 Dec 2019

Date Written: December 13, 2019

Abstract

This paper studies simultaneous multilateral search (SMS) in over-the-counter (OTC) markets: when searching, an investor contacts several potential counterparties and then trades with the one offering the best quote. Search intensity (how frequently one can search) and search capacity (how many potential counterparties one can contact) affect market qualities differently. Contrasting SMS to bilateral bargaining (BB), the model shows that investors might favor BB over SMS if search intensity is high or in distress. Such preference for BB hurts allocative efficiency and suggests an intrinsic hindrance in the adoption of all-to-all and request-for-quote type of electronic trading in OTC markets.

Keywords: all-to-all, request-for-quote, over-the-counter market, search, bargaining

JEL Classification: D4, G1

Suggested Citation

Glebkin, Sergei and Shen, Ji and Yueshen, Bart Zhou, Simultaneous Multilateral Search (December 13, 2019). Proceedings of Paris December 2019 Finance Meeting EUROFIDAI - ESSEC, Available at SSRN: https://ssrn.com/abstract=3389756 or http://dx.doi.org/10.2139/ssrn.3389756

Sergei Glebkin

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex
France

Ji Shen

Peking University ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China

Bart Zhou Yueshen (Contact Author)

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France

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