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

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  • Chen, Fan
  • Zhong, Zhuo

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.

Suggested Citation

  • Chen, Fan & Zhong, Zhuo, 2017. "Pre-trade transparency in over-the-counter bond markets," Pacific-Basin Finance Journal, Elsevier, vol. 45(C), pages 14-33.
    • Handle: RePEc:eee:pacfin:v:45:y:2017:i:c:p:14-33
    DOI: 10.1016/j.pacfin.2016.08.001
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    Cited by:

    1. Mao, Jie & Shen, Guanxiong & Yan, Jingzhou, 2023. "A continuous-time macro-finance model with Knightian uncertainty," Pacific-Basin Finance Journal, Elsevier, vol. 77(C).

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    More about this item

    Keywords

    Pre-trade transparency; OTC bond markets; Bond transaction cost;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G19 - Financial Economics - - General Financial Markets - - - Other

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