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Informed trading in hybrid bond markets

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  • Valseth, Siri

Abstract

I study the impact of pretrade transparency on trading activity in an environment where dealers, informed and uninformed alike, can choose between an electronic limit order book (LOB) and an over-the-counter (OTC) market. By investigating bond dealers' choice in the hybrid Norwegian government bond market, I explore whether they base their trading strategy on the perceived informativeness of their trades. The results imply that bond dealers act strategically to preserve the value of their information by choosing the immediacy of the LOB when trades contain information. This suggests that OTC trades are exposed to a leakage of information to other dealers.

Suggested Citation

  • Valseth, Siri, 2020. "Informed trading in hybrid bond markets," Global Finance Journal, Elsevier, vol. 44(C).
    • Handle: RePEc:eee:glofin:v:44:y:2020:i:c:s1044028318300073
    DOI: 10.1016/j.gfj.2018.07.003
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    References listed on IDEAS

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    Cited by:

    1. Wycliffe Oluoch & Kalu Ojah, 2024. "Financial Market Development and the Microstructure of Corporate Bond Markets in Africa: A Survey," The African Finance Journal, Africagrowth Institute, vol. 26(1), pages 1-33.

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    More about this item

    Keywords

    Dealers; Information leakage; Hybrid market; Pretrade transparency;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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