Fast responses can be a strategic liability in multi-bank deal distribution

Evidence

However, consistently shaping the response in some of these ways may have relationship costs: a trader may lose prestige and his or her good reputation and may no longer be contacted. Then again, conforming to the code may also be problematic under some circumstances; for example, when a caller wants to distribute a trade across several banks and contacts them simultaneously, a trader who responds fast may lose. The counterparty may wait until all prices are in before disclosing the deal, not wanting a fast trader to learn about it early and make similar moves, which might destroy the market for the caller. — Karin Knorr Cetina & Urs Bruegger, Global Microstructures, 117

Categorization

• XREF: Mirrors Milgrom’s point about information and punishment problems: here speed of response (i.e., revealing price information) is costly when the counterparty controls disclosure. — connects to: Exponential inter-onset distributions prevent timing-based response strategies

Broader Connections

• Exponential inter-onset distributions prevent timing-based response strategies #corroborates (0.75)