Augmenting Markets with Mechanisms / Samuel Antill, Darrell Duffie.

Format:

Book

Author/Creator:

Antill, Samuel.

Contributor:

National Bureau of Economic Research.

Duffie, Darrell.

Series:

Working Paper Series (National Bureau of Economic Research) no. w24146.

NBER working paper series no. w24146

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

We explain how the common practice of size-discovery trade detracts from overall financial market efficiency. At each of a series of size-discovery sessions, traders report their desired trades, generating allocations of the asset and cash that rely on the most recent exchange price. Traders can thus mitigate exchange price impacts by waiting for size-discovery sessions. This waiting causes socially costly delays in the rebalancing of asset positions across traders. As the frequency of size-discovery sessions is increased, exchange market depth is further lowered by the traders' reduced incentive to bid aggressively on the exchange, further delaying the rebalancing of positions, and more than offsetting the gains from trade that occur at each of the size-discovery sessions.

Notes:

Print version record

December 2017.