EconPapers    
Economics at your fingertips  
 

Corporate Bond Trading on a Limit Order Book Exchange

Menachem Abudy () and Avi Wohl

Review of Finance, 2018, vol. 22, issue 4, 1413-1440

Abstract: We investigate the trading of corporate bonds (c-bonds) by an open limit order book (LOB) mechanism. To do so, we use the case of the Tel Aviv Stock Exchange (TASE) as a laboratory, in which both stocks and c-bonds are traded by an LOB mechanism. Contrary to the OTC market in the USA, the TASE c-bond market is liquid with narrow spreads and low price dispersion. The short-term traders (STT), who are the analog of the market makers in the LOB, have small trading rents and unconcentrated activity (a low Herfindahl index). In the cross-section of bonds, the low concentration is related to low spreads, low price dispersion, and small STT rents. The non-STT [including retail investors (RIs), whose participation is significant] competes with the STT on quotation and tends to tighter quotes. RIs’ activity contributes to narrower spreads.

Keywords: Corporate bonds; Trading costs; Retail investors; Short-term investors; Bid–ask spreads; Liquidity (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1093/rof/rfx054 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:revfin:v:22:y:2018:i:4:p:1413-1440.

Ordering information: This journal article can be ordered from
http://www.oup.co.uk/journals

Access Statistics for this article

Review of Finance is currently edited by Josef ZechnerEditor-Name: Marco Pagano

More articles in Review of Finance from European Finance Association Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().

 
Page updated 2019-11-08
Handle: RePEc:oup:revfin:v:22:y:2018:i:4:p:1413-1440.