Dealer Networks and the Cost of Immediacy

Jens Dick-Nielsen, Thomas Kjær 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 date2021
Publication statusPublished - 2021
EventThe 19th International Paris December Finance Meeting - Virtual, Paris, France
Duration: 16 Dec 202116 Dec 2021
Conference number: 19


ConferenceThe 19th International Paris December Finance Meeting
Internet address


  • Dealer network
  • Dealer inventory
  • Search frictions
  • Transaction costs

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