Informed trading in hybrid bond markets

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.