Price Transparency in OTC Equity Lending Markets: Evidence from a Loan Fee Benchmark
Fabio Cereda () and
Bruno Giovannetti ()
Authors registered in the RePEc Author Service: Rodrigo De-Losso
No 2020_22, Working Papers, Department of Economics from University of São Paulo (FEA-USP)
We study the effects of a price transparency shock in the Brazilian OTC equity lending market. Previously, a publicly available stock-specific loan fee benchmark was the average fee of the past 15 trading days. On March 1, 2011, this interval was reduced to 3 days, significantly improving short-sellers' ability to predict current loan fees. We find that loan fees fell, lending volume increased, total lending revenue remained stable, high-cost lenders lost market share, and price efficiency increased after the benchmark change. Only a few countries benefit from loan fee benchmarks and our results may be relevant to regulators.
Keywords: price transparency; OTC markets; benchmarks; equity lending; search (search for similar items in EconPapers)
JEL-codes: G12 G14 G19 (search for similar items in EconPapers)
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