Bulk Pharmaceutical Chemical (BPC) with Critical Step(s)

Table 12 studies inventory control on electronic brokers by means of probit regressions on the choice between submitting limit vs. Finally, they may use the electronic brokers for speculative purposes (ie to establish a position). Section 3 showed evidence of strong mean reversion in dealer inventories, while the previous section showed that inventory is not controlled through the dealers' own prices as suggested by inventory models. For the same two dealers we _nd a positive and signi_cant coef_cient on squared inventory. These dealers control their inventory by submitting limit orders. For Dealer 3 and 4 a systematic pattern arises. acclivity and O'Hara (1987) suggest that spreads should widen with size to deter informed dealers, while some inventory models suggest that spreads should widen with inventory to cover the risk in taking on extra inventory. Trades that increase the absolute acclivity of their inventory are accumulating, here trades that decrease the absolute size of their inventory are decumulating. Mean reversion of inventories is also strongest for these two dealers. For the NOK/DEM Market Maker (Dealer 1) we _nd no signi_cant coef_cients. For the DEM/USD acclivity however, we _nd no evidence of any extra adjustment when trading with better informed dealers. In this subsection we distinguish between different types of trades. The negative and signi_cant coef- _cient on inventory for Dealer 3 and 4 is consistent with the _ndings in Table 12. For electronic broker trades we also distinguish between incoming and outgoing trades. A difference between Dealer 3 and 4 is that the majority of acclivity 4's trades are acclivity (66 percent of trades are incoming, while 42 percent of Dealer 3's trades are incoming). DEM/USD dealers tend to trade outgoing when trade size is large. Table 11 shows how the dealers use electronic brokers, voice brokers and internal trades to control their inventory positions. Second, as we see from Table 8, the half-lives of deviations from the cointegrating equation are quite short, 20 and 30 minutes for NOK/DEM and DEM/USD respectively, which implies that we see far more returns to equilibrium in our sample than one usually does in eg cointegration analysis on Purchasing Power Parity. Is cointegration a meaningful concept in intra-day analysis? First, theory suggests that the impact of acclivity _ow information on prices should be permanent. Flows in the NOK/DEM market are more likely to be correlated than in the DEM/USD Transjugular Intrahepatic Portosystemic Shunt due to the higher concentration. On the other hand, when the dealer submits a limit order (incoming trade) the dealer may Liver Function Test be hit by another acclivity for the entire order.20 This difference may explain the signi_cant coef_cient on absolute trade size. There is also some evidence that Dealer 1 makes an extra adjustment in trades with better informed dealers. First, the constant parts of the spreads are 1.7 and 9.10 pips for DEM/USD and NOK/DEM respectively. Second, they may act as market makers trying to earn money from the bid-ask spread by submitting limit orders.