Market transparency, liquidity externalities, and institutional trading costs in corporate bonds

• 成果类型: Article
• 署名作者: Bessembinder, Hendrik; Maxwell, William; Venkataraman, Kumar
• 署名单位: Utah System of Higher Education; University of Utah; University of Arizona; Southern Methodist University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2005.10.002
• 发表日期: 2006
• 页码: 251-288
• 关键词: Corporate bonds; Institutional trading costs; market transparency

摘要

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. (c) 2006 Elsevier B.V. All rights reserved.