Market transparency,liquidity externalities,and institutional trading costs in corporate bonds |
| |
Authors: | Hendrik Bessembinder William Maxwell Kumar Venkataraman |
| |
Institution: | 1. David Eccles School of Business, University of Utah, Salt Lake City, UT, 84112, USA;2. Eller School of Management, University of Arizona, Tucson, AZ, 85721, USA;3. Cox School of Business, Southern Methodist University, Dallas, TX, 75275, USA |
| |
Abstract: | We develop a simple model of the effect of public transaction reporting on trade execution costs and test it using a sample of institutional trades in corporate bonds, before and after initiation of the TRACE reporting system. Trade execution costs fell approximately 50% for bonds eligible for TRACE transaction reporting, and 20% for bonds not eligible for TRACE reporting, suggesting the presence of a “liquidity externality.” The key results are robust to changes in variables, such as interest rate volatility and trading activity that might also affect execution costs. Market shares and the cost advantage to large dealers decreased post-TRACE. These results indicate that market design can have first-order effects, even for sophisticated institutional customers. |
| |
Keywords: | D82 G14 G19 |
本文献已被 ScienceDirect 等数据库收录! |
|