We propose a dynamic model of bidding in treasury auctions, in which primary dealers must satisfy minimum winning requirements to retain their dealer status. Data from Argentina between 1996 and 2001, a period in which primary dealer requirements were particularly important, shows dealers bid more aggressively the greater their shortfalls in meeting the requirements, thus sacrificing short-term profits to retain their status. We then leverage this trade-off and develop a method for estimating the value of being a primary dealer. We estimate that the gain from being a dealer is of the same order of magnitude as short-term profits. Dealers who bid optimally retain dealer status with high probability, but may have to sacrifice a significant amount of short-term profits to do so. Finally, we use our model to perform a counterfactual exercise which illustrates how the central bank can use minimum winning requirements in order to reduce dealers’ rents.

We observe every update to the limit order book of S&P 500 E-mini futures, the world's most traded equity derivative, over 2009-2025. Exploiting previously unused information in a public data feed, we decompose market depth into the number of liquidity providers and the quantity each supplies. Dollar depth fell 80% over the decade to 2022, and since then has not recovered. The drop is due to the number of providers, not the dollar amount each quotes. To understand this, we model the choice to provide liquidity. Providers enter when profits cover a participation cost; scarcer risk-bearing capacity first draws them in, then drives them out. Rising participation costs can account for the secular decline while weaker demand for liquidity cannot, since trading volume has held up. In exchange-traded markets, participation has become an arms race in speed, talent, and data. As the number of providers has fallen, the price impact for a given amount of order flow more than doubled.

We show that multimarket contact (MMC)—the extent to which the same dealers interact across many securities—disciplines the pricing of corporate bonds. In a repeated-game model, where dealers alternate between supplying and demanding liquidity, a dealer that is tempted to widen spreads for a short-run gain is deterred by the prospect of facing wider spreads when next demanding liquidity. MMC pools this discipline across securities: a deviation in one security triggers retaliation in the others. The model predicts that higher MMC for one dealer lowers spreads for all dealers active in that bond, with the largest effects when adverse selection is high or trading is infrequent. Using TRACE data, we exploit within-bond-month variation across dealers and within-dealer-month variation across bonds. Higher MMC compresses interdealer spreads, with reductions passed through to customers. A shift–share instrument based on the sharp increase in investment-grade bond issuance during COVID confirms the result.