TY  - JOUR
AU  - Hortacsu,Ali
AU  - Sareen,Samita
TI  - Order Flow and the Formation of Dealer Bids: Information Flows and Strategic Behavior in the Government of Canada Securities Auctions
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11116
PY  - 2005
Y2  - February 2005
UR  - http://www.nber.org/papers/w11116
L1  - http://www.nber.org/papers/w11116.pdf
N1  - Author contact info:
Ali Hortacsu
Department of Economics
University of Chicago
1126 East 59th Street
Chicago, IL  60637
Tel: 773/702-5841
E-Mail: hortacsu@uchicago.edu
AB  - Is order-flow an important component of private information possessed by traders in government securities markets? Utilizing a detailed data set on Government of Canada securities auctions, we argue that the answer is yes. Direct participation in these auctions is limited to government securities dealers. However, non-dealer customers can also submit bids through dealers. We document patterns of strategic behavior by both sides of the market, dealers and customers, that support the hypothesis that customer bids provide valuable order-flow information to dealers. Dealer bids respond to privately observed customer bids, and dealers observing customer bid can predict the auction cutoff price better. Customers also respond strategically to dealers' use of the information contained in their bids.
ER  -