Enhancement of primary dealer system and primary market will be furthered via introduction of more stringent criteria such as narrower bid-asked spread
requirement, better bidding performance and more intra-exchange trading activities.
I think the clearest case for [caring] is the collapse of the bid-asked spread
," Whitcomb declares.
Hagerman, 1974, "Determinants of Bid-Asked Spreads
in the Over-the-Counter Market," Journal of Financial Economics 1, 353-364.
Determinants of bid-asked spreads
in the over-the-counter market", Journal of Financial Economics, 1 (December), pp.
Many financial markets turned illiquid, with wider bid-asked spreads
and heightened price volatility, and issuance was disrupted in some private securities markets.
The government securities market spans a wide range of securities, from the extremely liquid, so-called on-the-run Treasury securities, for which bid-asked spreads
are razor-thin, to the more exotic and sometimes tailor-made hybrids and derivatives, for which a fair markup could be sizable.