Taking Orders and Taking Notes

Dealer Information Sharing in Treasury Auctions

Bibliographic Data

ID10180705
AuthorsNina Boyarchenko (0000-0002-1434-2111, Federal Reserve Bank of New York), David O Lucca (Federal Reserve Bank of New York), Laura Veldkamp (National Bureau of Economic Research)
Year2020
Volume129
Issue2
Pages607-645
Publication date2020-10-05
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueJournal of Political Economy (JOURNAL)
Journal identifiersISSN: 0022-3808 • E-ISSN: 1537-534X
PublisherUniversity of Chicago Press (PUBLISHER • US)
DOI10.1086/711954
OpenAlexW3091857962
LanguageEN
Citations received1
References cited33

The use of order-flow information by financial firms has come to the forefront of the regulatory debate. Should a dealer who acquires information by taking client orders be allowed to use or share that information? We explore how information sharing affects dealers, clients, and issuer revenues in US Treasury auctions, in a model calibrated to auction results data, which we use to quantify counterfactuals. Sharing information reduces uncertainty about future value. With less uncertainty, risk-averse bidders bid more. For investors, the welfare effects of information sharing depend on how information is shared and how it affects asymmetry. The model shows that investors can benefit when dealers share information with each other, not when they share more with clients

Business · Common value auction · Counterfactual conditional · Counterfactual thinking · Economics · Information asymmetry · Information flow · Information sharing · Issuer · Microeconomics · Order (exchange · Revenue · Revenue sharing · Treasury · Value (mathematics · Auction Theory and Applications · Computer Science · Corporate Finance and Governance · Finance · Financial Markets and Investment Strategies

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