Does Dodd-Frank affect OTC transaction costs and liquidity? Evidence from real-time CDS trade reports

• 成果类型: Article
• 署名作者: Loon, Yee Cheng; Zhong, Zhaodong (Ken)
• 署名单位: U.S. Securities & Exchange Commission (SEC); Rutgers University System; Rutgers University New Brunswick
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2016.01.019
• 发表日期: 2016
• 页码: 645-672
• 关键词: Dodd-Frank Act; over-the-counter markets; liquidity; Real-time trade reporting; Credit Default Swaps

摘要

This paper examines transaction costs and liquidity in the index CDS market by matching intraday quotes to real-time trade reports made available through the Dodd-Frank reforms. We find that the average relative effective spread is 0.27% of price level or 2.73% of CDS spread. Dodd-Frank does affect transaction costs and liquidity. Liquidity improves after the commencement of public dissemination of OTC derivatives trades. Moreover, cleared trades, trades executed on exchange-like venues, end-user trades, and bespoke trades exhibit lower trading costs, price impact, and price dispersion. These findings improve our understanding of the OTC derivatives market that is undergoing fundamental changes. (C) 2016 Elsevier B.V. All rights reserved.