Receiving investors in the block market for corporate bonds

Stacey Jacobsen and Kumar Venkataraman

Journal of Financial Economics, 2025, vol. 170, issue C

Abstract: We study block trades in the corporate bond market, where dealers buy or sell blocks from initiating customers and offset their positions with receiving investors. Our findings indicate that while receivers benefit from trading cost savings, they primarily bear adverse selection costs and experience worse outcomes when informed trading is prevalent. Mandatory trade reporting improves receiver outcomes by revealing dealers’ private information, but the benefits are reduced when reporting is delayed. Our results emphasize the importance of transparency regime design and suggest potential market fragility: if information asymmetry becomes severe, receivers may withdraw from the block market.

Keywords: Block market; Dealer; Trading cost; Transparency; Asymmetric information; Receiving investors (search for similar items in EconPapers)
JEL-codes: G12 G14 G18 G23 G24 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:170:y:2025:i:c:s0304405x25000698

DOI: 10.1016/j.jfineco.2025.104061

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