Simultaneous multilateral search

• Main Authors: GLEBKIN, Sergei, YUESHEN, Bart Zhou, SHEN, Ji
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2023
• Subjects: Request-for-quote; over-the-counter market; search; bargaining; Finance and Financial Management; Portfolio and Security Analysis
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/7284; https://ink.library.smu.edu.sg/context/lkcsb_research/article/8283/viewcontent/SimultaneousMultiSearch_sv__1_.pdf
• Institution: Singapore Management University

This paper studies simultaneous multilateral search (SMS) in over-the-counter markets: When searching, a customer simultaneously contacts several dealers and trades with the one offering the best quote. Higher search intensity (how often one can search) improves welfare, but higher search capacity (how many dealers one can contact) might be harmful. When the market is in distress, customers might inefficiently favor bilateral bargaining (BB) over SMS. Such a preference for BB speaks to the sluggish adoption of SMS trading, like request-for-quote protocols, in over-the-counter markets. Furthermore, a market-wide shift to SMS may not be socially optimal.