Pre-trade transparency in over-the-counter bond markets

Fan Chen and Zhuo Zhong

Pacific-Basin Finance Journal, 2017, vol. 45, issue C, 14-33

Abstract: Using bond transaction data from TRACE from 2005 to 2015, we investigate the impact of pre-trade transparency on over-the-counter bond markets, and find that NYSE pre-trade transparency reduces US corporate bond transaction costs by $846million per year. NYSE pre-trade transparent bonds also maintain smaller standard deviation in bid-ask spreads and institutional investors face smaller bid-ask spreads when trading the pre-trade transparent bonds, suggesting that pre-trade transparency tends to favor traders rather than dealers by enhancing traders' bargaining capability.

Keywords: Pre-trade transparency; OTC bond markets; Bond transaction cost (search for similar items in EconPapers)
JEL-codes: G14 G19 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:45:y:2017:i:c:p:14-33

DOI: 10.1016/j.pacfin.2016.08.001

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