Work

The Effects of Mandatory Transparency in Financial Market Design: Evidence from the Corporate Bond Market

Year: 2013

Type: report

Abstract: In July 2002, FINRA began mandatory dissemination of price and volume information for corporate bond trades.This paper, using recently released data, measures transparency's effect on trading activity and costs for the entire corporate bond market.Even though trading costs decrease significantly across all types of bonds, trading activity does not increase and, by one measure, decreases.Transparency affects high-yield bonds differently than investment grade bonds.Highyield bonds have the largest decrease in trading activity, 71.1%, and in trading costs, 22.9%.Highyield bonds also disproportionately contribute to the estimated reduction in total trading costs of $600 million a year.

Source: National Bureau of Economic Research

DOI: 10.3386/w19417

Authors: Paul Asquith, Thom Covert, Parag Pathak

Institutions: National Bureau of Economic Research, University of Chicago, Massachusetts Institute of Technology

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W1505810083

Cites: 38

Cited by: 79

Related to: 10