UID:
almafu_9959310766602883
Format:
1 online resource (31 pages).
ISBN:
1-4983-1435-X
,
1-4983-1438-4
Series Statement:
IMF Working Papers
Content:
New regulatory data reveal extensive price discrimination against non-financial clients in the FX derivatives market. The client at the 90th percentile pays an effective spread of 0.5%, while the bottom quarter incur transaction costs of less than 0.02%. Consistent with models of search frictions in over-the-counter markets, dealers charge higher spreads to less sophisticated clients. However, price discrimination is eliminated when clients trade through multi-dealer request-for-quote platforms. We also document that dealers extract rents from captive clients and market opacity, but only for contracts negotiated bilaterally with unsophisticated clients.
Additional Edition:
ISBN 1-4983-0377-3
Language:
English
