Swap trading after Dodd-Frank: Evidence from index CDS

摘要: Abstract The Dodd-Frank Act mandates that certain standard over-the-counter (OTC) derivatives must be traded on swap execution facilities (SEFs). Using message-level data, we provide a granular analysis of dealers’ and customers’ trading behavior the two largest dealer-to-customer SEFs for index credit default swaps (CDS). On average, typical customer contacts few dealers when seeking liquidity. A theoretical model shows benefit competition through wider order exposure is mitigated by winner’s curse problem dealer-customer relationships. Consistent with model, find size, market conditions, customer-dealer relationships are important empirical determinants choice mechanism liquidity provision.