Contrary to the prediction of the classic adverse selection theory, informed speculators receive better pricing relative to uninformed liquidity traders in over-the-counter financial markets. Dealers compete for information by chasing informed orders so as to better position their future price...

Contrary to the prediction of the classic adverse selection theory, a more informed trader could receive better pricing relative to a less informed trader in over‑the‑counter financial markets. Dealers chase informed orders to better position their future quotes and avoid winner’s curse in...