Tomy Lee

Assistant Professor, Economics and Business, Central European University

FTG member (2023-)

Research Interests: Design of Financial Markets, Over-the-Counter Markets, Applied Theory

CV: Click Here 

Contact: leeso[at]

Google Scholar, ORCiD


Review of Economic Dynamics (Special Issue on Fragmented Financial Markets; available:

I examine the impact of cross-venue latency on market quality using a model of informed trader competition in a fragmented market. As cross-venue latency decreases, liquidity and price discovery improve while the expected profits of informed traders decline. Moreover, a fall in the latency of one venue can harm liquidity at the other venue. An extension predicts that, as the informed traders consolidate or outsource trading, benefits of shorter cross-venue latency are attenuated and its harmful effects intensify. My model generates testable predictions about the effects of changes in cross-venue latency on market quality.

Working Papers

Why Trade Over-the-Counter? (Forthcoming, Journal of Finance)

(with Chaojun Wang)

Conference Presentations: AFA 2020, FML Budapest 2019, 2018: AMES, ASSA, CBC Hong Kong, EFA, EUROfidai

Over-the-counter trading thrives despite opposing regulatory pressure. In our model, traders who are less likely to be informed optimally choose the OTC market, where a dealer offers a trader-specific discount. Penalizing OTC trades causes some traders to exit but induces others with larger gains from trade to enter. Overall, aggregate trade volume falls and average bid-ask spread widens, yet welfare strictly improves if adverse selection risk is low. In a benchmark case, closing the OTC market strictly raises welfare specifically where most trades occur over the counter. We devise a simple procedure to implement the optimal Pigouvian tax.

Discussion Slides

“Less is More” (Yueshen, Zou; 2023, Sep)

“Dealer Heterogeneity and Exchange Rates” (Gallien, Glebkin, Kassibrakis, Malamud,  Teguia; 2023, Aug)

“On ESG Investing” (Goldstein, Kopytov, Shen, Xiang; 2022, Aug)

“Fractional Trading” (Da, Fang, Lin; 2022, June)

"Overdue Debts and Financial Exclusion" (Berlinger, Dobránszky-Bartus, Molnár; 2020, Nov)

"Information and Optimal Trading Strategies with Dark Pools" (Bayona, Dumitrescu, Manzano; 2019, Nov)

"OTC Discount" (de Roure, Moench, Pelizzon, Schneider; 2018, Dec)

"Discriminatory Pricing of Over-the-Counter Derivatives" (Hau, Hoffmann, Langfield, Timmer; 2018, Jan)

"Gold Price Dynamics and the Role of Uncertainty" (Beckmann, Berger, Czudaj; 2016, June)