Why Do Larger Orders Receive Discounts on the London Stock Exchange?
AbstractWe argue that competition between dealers in a classic dealer market is intertemporal: A trader identifies a particular dealer and negotiates a final price with only the intertemporal threat to switch dealers imposing pricing discipline on the dealer. In this kind of market structure, we show that dealers will offer greater price improvement to more regular customers, and, in turn, these customers optimally choose to submit larger orders. Hence, price improvement and trade size should be negatively correlated in a dealer market. We confirm our model's predictions using unique data from the London Stock Exchange during 1991. Copyright 2005, Oxford University Press.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Society for Financial Studies in its journal The Review of Financial Studies.
Volume (Year): 18 (2005)
Issue (Month): 4 ()
Contact details of provider:
Postal: Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.
Web page: http://www.rfs.oupjournals.org/
More information through EDIRC
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Nicholas Wilson, 2011.
"Fertility Responses to Prevention of Mother-to-Child Transmission of HIV,"
Department of Economics Working Papers
2011-11, Department of Economics, Williams College, revised Sep 2011.
- Nicholas Wilson, 2011. "Fertility Responses to Prevention of Mother-to-Child Transmission of HIV," Center for Development Economics 2011-08, Department of Economics, Williams College, revised Sep 2011.
- Osler, Carol & Mende, Alexander & Menkhoff, Lukas, 2006.
"Price Discovery in Currency Markets,"
Diskussionspapiere der Wirtschaftswissenschaftlichen FakultÃ¤t der Leibniz UniversitÃ¤t Hannover
dp-351, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
- DESGRANGES, Gabriel & FOUCAULT, Thierry, 2000.
"Reputation-based pricing and price improvements in dealership markets,"
Les Cahiers de Recherche
716, HEC Paris, revised 01 Mar 2002.
- Desgranges, Gabriel & Foucault, Thierry, 2002. "Reputation-Based Pricing and Price Improvements in Dealership Markets," CEPR Discussion Papers 3359, C.E.P.R. Discussion Papers.
- Ramadorai, Tarun, 2006. "Persistence, Performance and Prices in Foreign Exchange Markets," CEPR Discussion Papers 5861, C.E.P.R. Discussion Papers.
- Angelidis, Timotheos & Andrikopoulos, Andreas, 2010.
"Idiosyncratic risk, returns and liquidity in the London Stock Exchange: A spillover approach,"
International Review of Financial Analysis,
Elsevier, vol. 19(3), pages 214-221, June.
- Andreas Andrikopoulos & Timotheos Angelidis, 2008. "Idiosyncratic risk, returns and liquidity in the London Stock Exchange: a spillover approach," Working Papers 0017, University of Peloponnese, Department of Economics.
- Bruno Biais & Richard C. Green, .
"The Microstructure of the Bond Market in the 20th Century,"
GSIA Working Papers
2005-E57, Carnegie Mellon University, Tepper School of Business.
- Biais, Bruno & Green, Richard, 2007. "The Microstructure of the Bond Market in the 20th Century," IDEI Working Papers 482, Institut d'Économie Industrielle (IDEI), Toulouse.
- Carol Osler, 2012. "Market Microstructure and the Profitability of Currency Trading," Working Papers 48, Brandeis University, Department of Economics and International Businesss School.
- Amy K Edwards, 2006. "Corporate bond market microstructure and transparency - the US experience," BIS Papers chapters, in: Bank for International Settlements (ed.), Developing corporate bond markets in Asia, volume 26, pages 31-38 Bank for International Settlements.
- Desgranges, Gabriel & Foucault, Thierry, 2005. "Reputation-based pricing and price improvements," Journal of Economics and Business, Elsevier, vol. 57(6), pages 493-527.
- Tarun Ramadorai, 2008. "What determines transaction costs in foreign exchange markets?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 13(1), pages 14-25.
- Ana Babus, 2011. "Strategic Relationships in Over-the-Counter Markets," 2011 Meeting Papers 1405, Society for Economic Dynamics.
- Malay Dey & Hossein Kazemi, 2008. "Bid ask spread in a competitive market with institutions and order size," Review of Quantitative Finance and Accounting, Springer, vol. 30(4), pages 433-453, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.