Transparency and dealer networks: Evidence from the initiation of post-trade reporting in the mortgage backed security market

Paul Schultz and Zhaogang Song

Journal of Financial Economics, 2019, vol. 133, issue 1, 113-133

Abstract: We examine the introduction of mandatory post-trade reporting in the To-Be-Announced mortgage-backed securities market. With post-trade reporting, trading costs fell for institutional investors. Trading costs declined more for investors’ trades with peripheral dealers than for their trades with core dealers. Peripheral dealers’ market share dropped after the introduction of post-trade reporting, suggesting that opacity was protecting inefficient high-cost dealers. Interdealer trades and volume declined as transparency made it easier to find natural counterparties. Relationships between dealers became less important and, after controlling for the number of trades, dealers used more counterparties in interdealer trades.

Keywords: Dealer market; Transparency; Mortgage backed securities; Core-periphery (search for similar items in EconPapers)
JEL-codes: G12 G23 G28 R39 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:133:y:2019:i:1:p:113-133

DOI: 10.1016/j.jfineco.2019.01.007

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