Order Flow and the Formation of Dealer Bids: An Analysis of Information and Strategic Behavior in the Government of Canada Securities Auctions
51 Pages Posted: 26 Nov 2004
Date Written: December 2004
Using data on Government of Canada securities auctions, this paper shows that in countries where direct access to primary issuance is restricted to government securities dealers, Order-flow information is a key source of private information for these security dealers. Order-flow information is revealed to a security dealer through his interactions with customers, who can place bids in the auctions only through the security dealer. Since each dealer interacts with a different set of customers, they, in effect, see different portions of the market demand and supply curves, leading to differing private inferences of where the equilibrium price might.
Keywords: Treasury auctions, Behavioural finance
JEL Classification: D82, G14, L88
Suggested Citation: Suggested Citation