In traditional over-the-counter markets, investors trade bilaterally through intermediaries. We assess whether and how to shift trades on a centralized platform with trade-level data on the Canadian government bond market. We document that intermediaries charge a markup when trading with  investors, and specify a model to quantify price and welfare effects from market centralization. We find that many investors would not use the platform, even...

We examine how intermediary capitalization affects  asset prices in a framework that allows for intermediary market power.  We introduce a model in which capital constrained intermediaries buy or trade an asset in an imperfectly competitive market, and show that weaker capital constraints lead to both higher prices and  intermediary markups. In exchange markets, this results in reduced market liquidity, while in primary markets, it leads...

Leveraging an institutional feature that Treasury auctions of different maturities are often held simultaneously, we propose  a method for estimating demand systems for Treasuries, avoiding the usual endogeneity issues in demand estimation. We implement our method using bidding data from Canadian T-bill auctions, and find that different types of T-bills are only weak substitutes, despite their cash-like nature. We provide a micro-foundation of  demand in...