European Business Schools Librarian's Group
HEC Research Papers Series,
HEC Paris
No 1626: Dealers as Record Keepers
Vincent Maurin and John Chi-Fong Kuong
Additional contact information
Vincent Maurin: HEC Paris - Finance Department; Swedish House of Finance
John Chi-Fong Kuong: The Chinese University of Hong Kong (CUHK) - CUHK Business School; Centre for Economic Policy Research (CEPR); Finance Theory Group (FTG)
Abstract: Trading relationships in over-the-counter (OTC) markets are persistent and often exclusive, despite technological advances that have expanded clients' access to dealers. We rationalize this pattern in a model where trading relationships allow dealers to learn their clients' trading motives from their trading records. Relationship dealers set record-contingent quotes, generating price discrimination that mitigates adverse selection for liquidity-driven clients. Moreover, we show that clients prefer exclusive relationships to keep their record private. As a result, post-trade transparency and trading protocols that facilitate public inference of clients' trading records by dealers (e.g., Request for Quote relative to Request for Market) may reduce gains from trade.
Keywords: OTC Markets; Relationship Trading; Trading Record; Transparency
64 pages, February 19, 2026
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