OTC Market Research Articles

Socially optimal search intensity in over-the-counter markets

This paper investigates the endogenous search intensity of traders in the OTC market, examining both competitive equilibrium and socially optimal scenario. Our study introduces a random search-and-matching model, where traders have the flexibility to ex post choose and adjust their search intensities based on two trader-level states: asset position and preference type. Our findings uncover the following key insights: (1) Changes in the level of search friction and/or the frequency of shocks on traders' preference type may lead to traders switching between high and low search intensities, shifting between the core and periphery of the trading network; and (2) Social optimality is achieved in the absence of intermediation, where no trader simultaneously invests in positive buying intensity and positive selling intensity. In contrast, competitive equilibrium reveals that some traders tend to over-search while others under-search, compared to the socially optimal outcome.

The impact of directors' information technology experience on the financing constraints of internet start-ups-Data mining with python on the China's New OTC market.

In the era of Internet information technology, the IT background of directors plays a significant role in corporate governance. However, existing research lacks sufficient discussion on the financing constraints faced by Internet startups. This paper examines Internet entrepreneurial enterprises listed on the New Third Board as the research sample. Using content analysis coding methods and Python software for text mining, the study empirically analyzes the impact of directors' IT backgrounds and media reports on the financing constraints of these enterprises. The results indicate the following: First, directors with IT backgrounds help reduce the financing constraints of Internet startups. The higher the directors' proficiency in information technology, the more favorable it is for obtaining financing. Second, directors with IT backgrounds have a significant positive impact on the tone of media reports. Third, the tone of media reports reflects the spirit and development of the enterprises, serving as a mediating factor between directors' IT backgrounds and the financing constraints of the enterprises. The findings of this study are valuable for guiding Internet startups to better leverage the IT expertise of their directors. Additionally, they provide useful insights for reducing the financing constraints faced by these startups.

Research on the Influencing Factors and Estimation Model of Enterprise Value: Evidence from China's New OTC Market

Research on the Influencing Factors and Estimation Model of Enterprise Value: Evidence from China's New OTC Market

Delamination of information disclosure and stock price synchronicity — Evidence from China’s NEEQ market

Information disclosure aids investor in better valuating firm, but how does stock price react to a better information disclosure environment? Using a policy shock in which information disclosure requirements are delaminated, we implement a difference-in-difference approach to evaluate how delaminated stocks behave differently compared to other stocks listed in a Chinese OTC market NEEQ. We find that this reduces the stock price synchronicity of those affected stocks, controlling other firm characteristics. Investors are motivated by the policy, as evidenced by the increased trading volume to the affected stocks, which serving a mediating role that affects the synchronicity of stock prices. We interpret the result that more firm-specific information is reflected in the price through transactions, hence the improved pricing efficiency of the delaminated stocks shows a decline of synchronicity.

Performance relative to aspiration and SMEs' internationalization speed: the moderating effects of policy knowledge and institutional distance

PurposeThis study seeks to explore the relationship between performance relative to aspiration and SMEs' internationalization speed, and moderating effects of top management's policy knowledge and institutional distance between the above relation.Design/methodology/approachThis study tests the authors’ hypotheses using data on Chinese manufacturing SMEs over a 5-year period from 2013 to 2017. The authors leverage archival panel data on publicly listed companies on the SME Board, GEM and New OTC Market in the Shanghai and Shenzhen Stock Exchanges. The authors then collected data from the WIND and ZEPHYR databases.FindingsThe results confirm a U-shaped relation between performance relative to aspiration and SMEs' internationalization speed, and show that this relation is steepening by top management's policy knowledge in home country but flattening by institutional distance as environmental dynamics.Originality/valueThe study findings contribute to the international business field by exploring how a firm's risk situation in internationalization can change, thereby influencing SMEs' international expansion.

Risk Management in the Electricity Market and the Transition to NET 0 via DLT (Blockchain Technology)

Abstract The Romanian energy market has undergone, since the beginning of 2017, a period of turmoil underlying a short-term price rise, simultaneously with the inability of some market traders to comply with the contractual liabilities to which they had committed. Overall, the end consumer was not affected, however a series of traders became insolvent, and losses were taken over by the system operator and the suppliers of last resort. This paper aims at exploring the manner how principles applied in the blockchain concept, which lately has become extremely popular due to virtual coins, particularly Bitcoin, may be useful to all participants of an OTC market. This new technology could allow the appearance of new solutions to monitor the energy source used to achieve the NET 0 objective. This article represents exclusively the author’s point of view and does not involve in any way the employer he is representing in the conference.

Application Study of "Blockchain + OTC Market" Model

Blockchain technology has a broad application prospect and application value in the financial industry due to the characteristics of decentralization, programmability and information immutability, and the traditional financial industry is facing new opportunities and challenges. The application scenarios of blockchain technology in OTC market fund registration, electronic contract and data exchange and management are selected to analyze their respective status, application value and compliance, to summarize the application value of blockchain technology in OTC market, to effectively play the innovative effect of "blockchain + OTC market" in the financial industry, and to explore the new application path of blockchain technology.

Review on Financial Risk Early Warning of NEEQ Enterprises in China

The New OTC Market is an over-the-counter market for the financing of China's growing and innovative small and medium-sized enterprises. In recent years, the Chinese government has also put forward higher requirements for the financial risk control of NEEQ enterprises. In view of the above situation, this paper summarizes the research on the financial risks of NEEQ enterprises. The following conclusions are drawn: (1) the research focusing on the financial risk of NEEQ enterprises is mostly empirical qualitative research; (2) The research on quantitative early warning of NEEQ enterprises financial risk is not in-depth.

What Type of Transparency in OTC Markets?

What Type of Transparency in OTC Markets?

Heterogeneous Asset Valuation in OTC Markets and Optimal Inflation

Heterogeneous Asset Valuation in OTC Markets and Optimal Inflation

Inventory, Market Making, and Liquidity in OTC Markets

Inventory, Market Making, and Liquidity in OTC Markets

Incentives to Lose: Disclosure of Cover Bids in OTC Markets

Incentives to Lose: Disclosure of Cover Bids in OTC Markets

OTC Market and Redelegation of Regulatory Authority

OTC Market and Redelegation of Regulatory Authority

Price clusters and stock price stability

Understanding the factors affecting stock return volatility, for analysts, investors and company executives, it is critical. In this study, using a traditional approach, we identify the factors influencing volatility and how price friction is formed on stock price stability, and in particular, examining the clustering test for price increases. This study was carried out by examining the price clusters and stock price stability in the stock market and the OTC market between 2009 -2010. Econometric software was used to investigate the research variables. In this study, we tried to study stock price volatility in proportion to stock price clusters. Research findings showed; there is no significant relationship between stock price volatility and price clusters in the OTC market and the stock market.

Neural network technologies for analysis and risk assessment in forecasting the market of industrial financial instruments

The issues of risk analysis and assessment in forecasting the dynamics of prices on the stock exchange and the OTC market have always been a difficult task for many researchers and analysts. Successful investment is largely determined by knowledge of the future situation in the financial market. The article deals with the issues of search and development of technical tools for risk analysis and assessment in forecasting the market of derivative financial instruments under conditions of uncertainty. A recurrent network with a long-term short-term memory cell LSTM, which is one of the most powerful prediction models, was chosen as the architecture of neural networks. The development of technical tools for solving this problem was carried out on the basis of the C# programming language. An additional TA-Lib library served as a mathematical base for technical analysis, from which 42 technical analysis indicators were used during the development process, and for working with the LSTM recurrent network, the library Keras.NET. The ability to efficiently link memory and input remote data using these network memory cells provides a dynamic understanding of the data structure over time. The estimates of the accuracy of the forecast for the cost indicators of a derivative financial instrument obtained as a result of computer experiments showed the high efficiency of the constructed neural network model.

Public choice and private contracting in financial markets

ABSTRACT In this article, I propose that high levels of concentration in markets make the production of standardised contracts in those markets more likely to be captured by the dominant players creating opportunities for them to extract rents and further reduce competition through contract and market design. I examine how contracts produced by the International Swaps and Derivatives Association (ISDA) shaped the organisation and its activities. ISDA’s governance was dominated by a concentrated group of dealer banks who benefited from the opaque OTC market microstructure revolving around ISDA’s standardised contracts. The organisation’s activities, such as lobbying and data collection, were aimed in part at preserving that microstructure allowing dominant firms to extract rents and reduce competition. In the absence of policy interventions, standardised contracts produced by trade associations can become captured in ways not dissimilar to public regulation.

Shrouding and the FX trades of global custody bank

This paper identifies a new approach to shrouding, the practice of hiding supra-competitive product prices, and sheds light on an extraordinarily opaque and hitherto unexplored segment of the world's largest OTC market. The product is liquidity for FX transactions between global custody banks and their client funds, transactions in which the clients are not actively involved and cannot identify execution costs ex post. We develop a stylized model of shrouding that predicts FX dealers will shift among three pricing strategies over time within individual client relationships. We conduct an extensive econometric analysis of the complete FX trading record of a mid-sized global custody bank over one calendar year. The data provide support for all ten of the shrouding model's testable hypotheses.

Identification of the Most Critical Factors in Bankruptcy Prediction and Credit Classification of Companies

Banks and financial institutions strive to develop and improve their credit risk evaluation methods to reduce financial loss resulting from borrowers' financial default. Although in previous studies, many variables obtained from financial statements - such as financial ratios - have been used as the input to the bankruptcy prediction process, seldom a machine learning method based on computing intelligence has been applied to select the most critical of them. In this research, the data from companies that are were listed in Tehran's Stock Exchange and OTC market during 26 years since 1992 to 2017 has been investigated, with 218 companies selected as the study sample. The ant colony optimization algorithm with k-nearest neighbor has been used to feature the selection and classification of the companies. In this study, the problem of the imbalanced dataset has been solved with the under-sampling technique. The results have shown that variables such as EBIT to total sales, equity ratio, current ratio, cash ratio, and debt ratio are the most effective factors in predicting the health status of companies. The accuracy of final research model is estimated that the bankruptcy prediction ranges between 75.5% to 78.7% for the training and testing sample.

Electronic Bond Intermediation: Evidence from Corporate Bond ATSs

We examine trading and quoting behavior of dealers in the corporate bond market, using dealer quotation data from two major corporate bond ATSs. We find a clear pecking order of transaction costs in which central dealers offer the lowest transaction costs, followed by high-quoting dealers, then moderate-quoting dealers, and finally non-quoting dealers. We also find that ATSs provide a useful venue for inventory management, especially for dealers who do not possess extensive bilateral trading networks as central dealers. Overall, our study contributes to broadening our understanding of electronic trading channels beyond the traditional voice trading channel and their implications on customer transaction costs in an important OTC market.

Secure RFQ Negotiations: Enhancing Privacy and Efficiency in OTC Markets

Secure RFQ Negotiations: Enhancing Privacy and Efficiency in OTC Markets