Optimal Panel Size for Fixed Income Trading

A recent publication of the BestX Research Team examined the optimal panel size for FX trading. In this paper, we extend this analysis to fixed income instruments. Intuitively, a large panel size may induce competition and help to minimize transaction costs.

However, a large panel size may also increase the probability of information leakage, i.e. counterparties in the panel may use the information gleaned from their participation to adversely move the market. In this paper, we examine the optimal panel size when trading fixed income instruments subject to this trade-off between execution cost and information leakage.

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