Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/64828 
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dc.contributor.authorReitz, Stefanen
dc.contributor.authorSchmidt, Markus A.en
dc.contributor.authorTaylor, Mark P.en
dc.date.accessioned2012-10-01-
dc.date.accessioned2012-10-11T14:44:23Z-
dc.date.available2012-10-11T14:44:23Z-
dc.date.issued2012-
dc.identifier.urihttp://hdl.handle.net/10419/64828-
dc.description.abstractThough unambiguously outperforming all other financial markets in terms of liquidity, foreign exchange trading is still performed in opaque and decentralized markets. In particular, the two-tier market structure consisting of a customer segment and an interdealer segment to which only market makers have access gives rise to the possibility of price discrimination. We provide a theoretical foreign exchange pricing model that accounts for market power considerations and analyze a database of the trades of a German market maker and his cross section of end-user customers. We find that the market maker generally exerts low bargaining power vis-á-vis his customers. The dealer earns lower average spreads on trades with financial customers than commercial customers, even though the former are perceived to convey exchange-rate-relevant information. From this perspective, it appears that market makers provide interdealer market liquidity to end-user customers with cross-sectionally differing spreads.en
dc.language.isoengen
dc.publisher|aKiel Institute for the World Economy (IfW) |cKielen
dc.relation.ispartofseries|aKiel Working Paper |x1794en
dc.subject.jelF31en
dc.subject.ddc330en
dc.subject.keywordforeign exchangeen
dc.subject.keywordmarket microstructureen
dc.subject.keywordpricing behavioren
dc.titleFinancial intermediation and the role of price discrimination in a two-tier market-
dc.typeWorking Paperen
dc.identifier.ppn726717592en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen
dc.identifier.repecRePEc:zbw:ifwkwp:1794en

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