Abstract:
In this talk, I will present a simple model for the contract formation process when multiple dealers compete for the flow of a noise trader in an OTC market structure. I introduce the concept of “last look” and formally show how the trader’s execution style and the dealers’ risk management approach directly impact liquidity access, execution costs, and various other important trading metrics. To illustrate the practical implications, I conclude with a few case studies obtained from a live trading environment.
Dr Roel Oomen is Global co-head of electronic FX Spot Trading at Deutsche Bank and visiting senior fellow at the London School of Economics and Political Science (LSE, Department of Statistics).