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We propose a model of trade in over-the-counter (OTC) markets in which each dealer with private information can engage in bilateral transactions with other dealers, as determined by her links in a network. Each dealer's strategy is represented as a quantity-price schedule. We analyze the effect of trade decentralization and adverse selection on information diffusion, expected profits, trading costs, and welfare. Information diffusion through prices is not affected by dealers' strategic trading motives, and there is an informational externality that constrains the informativeness of prices. Trade decentralization can both increase or decrease welfare. A dealer's trading cost is driven by both her own and her counterparties' centrality. Central dealers tend to learn more, trade more at lower costs, and earn higher expected profit.

Over-the-counter (OTC) markets dominate trading in many asset classes. Will electronic trading displace traditional OTC \"voice\" trading? Can electronic and voice systems coexist? What types of securities and trades are best suited for electronic trading? We study these questions by focusing on an innovation in electronic trading technology that enables investors to simultaneously search many bond dealers. We show that periodic one-sided electronic auctions are a viable and important source of liquidity even in inactively traded instruments. These mechanisms are a natural compromise between bilateral search in OTC markets and continuous double auctions in electronic limit order books.

We propose a model in which investors may choose to acquire costly information that identifies good assets and purchase these assets in opaque (OTC) markets. Uninformed investors access an asset pool that has been cream-skimmed by informed investors. When the quality composition of assets for sale is fixed, there is too much information acquisition and the financial industry extracts excessive rents. In the presence of moral hazard in origination, the social value of information varies inversely with information acquisition. Low quality origination is associated with large rents in the financial sector. Equilibrium acquisition of information is generically inefficient.

We examine the network of trading relationships between insurers and dealers in the over-the-counter (OTC) corporate bond market. Regulatory data show that one-third of insurers use a single dealer, whereas other insurers have large dealer networks. Execution prices are nonmonotone in network size, initially declining with more dealers but increasing once networks exceed 20 dealers. A model of decentralized trade in which insurers trade off the benefits of repeat business and faster execution quantitatively fits the distribution of insurers' network size and explains the price-network size relationship. Counterfactual analysis shows that regulations to unbundle trade and nontrade services can decrease welfare.

Using a complete record of U.S. over-the-counter (OTC) secondary trades in corporate bonds, we estimate average transaction costs as a function of trade size for each bond that traded more than nine times between January 2003 and January 2005. We find that transaction costs decrease significantly with trade size. Highly rated bonds, recently issued bonds, and bonds close to maturity have lower transaction costs than do other bonds. Costs are lower for bonds with transparent trade prices, and they drop when the TRACE system starts to publicly disseminate their prices. The results suggest that public traders benefit significantly from price transparency.

We empirically study whether systematic over-the-counter (OTC) market frictions drive the large unexplained common factor in yield spread changes. Using transaction data on U.S. corporate bonds, we find that marketwide inventory, search, and bargaining frictions explain 23.4% of the variation in the common component. Systematic OTC frictions thus substantially improve the explanatory power of yield spread changes and account for one-third of their total explained variation. Search and bargaining frictions combined explain more in the common dynamics of yield spread changes than inventory frictions. Our findings support the implications of leading theories of intermediation frictions in OTC markets.

Background Drug use (DU) during the first trimester of pregnancy (1tri) has been related to the development of some congenital anomalies (CA) The CA population-based Registry of Valencian Region (RPACCV) identifies DU from clinical records. Moreover, it exist the Dispensing drugs database to outpatient (GAIA). Aim to compare and identify differences between RPACCV and GAIA as sources for detect DU in CA's mothers during 1tri of gestation Methods Pregnant women, aged between 15-49 and residents in CV, which pregnancy outcome was a live birth or stillbirth with a CA between 2013-2021 were identified from RPACCV. Dispensed DU were obtained from GAIA and compared with the DU identified from RPACCV. In women which information was different between sources, DU were classified in: A, B, C, D, X based on the FDA Risk of use in pregnancy. Over-the-counter (OTC) were also identified. Proportions of DU based on the risk were estimated with their 95% confidence intervals (95%CI). Ratio for OTC was calculated by source Results 6818 women were identified, 3430 had DU registered in RPACCV and 3619 had DU in GAIA. Differences: 479 had DU registered in RPACCV with no dispensation in GAIA and 1463 women had DU in GAIA and no DU registered in RPACCV. DU with no risk for fetus (A/B) were the most found in both, being significantly higher in RPACCV 90% (95%CI:88-92) than in GAIA 84% (95%CI:83-86). However, DU of high risk for the fetus (C/D) or contraindicated (X) were mostly found in GAIA 16% (95%CI:14-17). OTC were recorded 7 times more in RPACCV. Moreover other DU as vaccines or methadone were not found in GAIA Conclusions To use RPACCV enables to obtain additional information as OTC, vaccines or methadone from medical records. Moreover, dispensations available from GAIA could identify more women with DU and more DU of high risk (C/D/X categories) in pregnancy. Therefore, to use both sources could be considered complementary and needed, as in synergy identify more women and more type of DU Key messages • In pregnancies with a congenital anomaly outcome in Valencian Region, most of drugs used during the first trimester had low risk for fetus and those of high risk were used under medical criteria. • Using multiple sources of information with drug use, such as population-based registries or dispensing data, allowed to identify more over-the-counter products and more pregnant women exposed.

We extend Duffie et al.’s (2005) search-theoretic model of over-the-counter (OTC) asset markets, allowing for a decentralized inter-dealer market with arbitrary heterogeneity in dealers’ valuations (or, equivalently, inventory costs). We develop a solution technique that makes the model fully tractable and allows us to derive, in closed form, theoretical formulas for key statistics analysed in empirical studies of the intermediation process in OTC markets. A calibration to the market for municipal bonds allows us to quantify important unobservable characteristics of this market, including the severity of search and bargaining frictions and the nature of heterogeneity across dealers. We use our calibrated model to study the effect of these market characteristics on total welfare and the distribution of gains from trade across customers and dealers.

We study an over-the-counter (OTC) market in which the usefulness of assets as a means of payment or collateral is limited by the threat of fraudulent practices. Agents can produce fraudulent assets at a positive cost, which generates upper bounds on the quantity of each asset that can be traded in the OTC market. Each of these endogenous, asset-specific, resalability constraints depends on the cost of fraud, on the frequency of trade, and on the asset price. In equilibrium, assets are partitioned into three liquidity tiers, which differ in their resalability, prices, haircuts, sensitivity to shocks, and responses to policies.

We develop a parsimonious model to study the equilibrium and socially optimal decisions of banks to enter, trade in, and possibly exit, an OTC market. Although we endow all banks with the same trading technology, banks' optimal entry and trading decisions endogenously lead to a realistic market structure composed of dealers and customers with distinct trading patterns. We decompose banks' entry incentives into incentives to hedge risk and incentives to make intermediation profits. We show that dealer banks enter more than is socially optimal. In the face of large negative shocks, they may also exit more than is socially optimal when markets are not perfectly resilient.