Dealer Networks and the Cost Immediacy

Jens Dick-Nielsen, Thomas Poulsen, Obaidur Rehman

Research output: Contribution to conferencePaperResearchpeer-review


We show that uninformed corporate bond index trackers pay lower transaction costs when they request immediacy from dealers with central network positions. This centrality discount supports recent network models in which core dealers have a comparative advantage in carrying inventory. We show that core dealers provide more immediacy and revert deviations from their desired inventory faster. When dealers trade with other dealers, we find a centrality premium consistent with core dealers exploiting their comparative advantage to extract more surplus when bargaining with peripheral dealers. We rule out alternative explanations based on adverse selection and customer clienteles by using trades from uninformed index trackers
Original languageEnglish
Publication date2022
Number of pages48
Publication statusPublished - 2022
EventThe 82nd Annual Meeting of American Finance Association. AFA 2022: Part of the ASSA 2022 Virtual Annual Meeting - , WWW
Duration: 7 Jan 20229 Jan 2022
Conference number: 82


ConferenceThe 82nd Annual Meeting of American Finance Association. AFA 2022
Internet address


  • Dealer network
  • Dealer inventory
  • Search frictions
  • transaction costs

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