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Market-making v.s. matchmarking: an empirical analysis using TRACE data
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| 1.88 MB | Adobe PDF |
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Resumo(s)
This study investigates the impact of Basel III Leverage Ratio and MiFID II on
market-making and matchmaking dynamics in the U.S. corporate bond market. Utilizing
transaction-level TRACE data, the analysis uncovers shifts in dealer strategies, liquidity
provision and trade execution efficiency. Results reveal matchmaking’s unexpected yield
advantages and superior profitability, while market-making retains its critical liquidity
premium. Employing weighted Difference-in-Differences (DiD) regressions, the study
highlights the nuanced effects of regulation across trade groups and counterparties. By
addressing search frictions and regulatory pressures, the findings offer valuable insights for
shaping balanced frameworks in decentralized financial markets.
Descrição
Palavras-chave
Search frictions Market-making Matchmaking Corporate bond market MiFID II Basel III leverage ratio Liquidity dynamics