The Difference a Day Makes: Timely Disclosure and Trading Efficiency in the Muni Market
The Real-Time Transaction Reporting System (RTRS) reduced the delay in reporting municipal bond trades from one-day to 15 min. We find a significant reduction in secondary market trading costs after the introduction of the RTRS. Our estimates imply that retail investors benefited primarily from reduced dealer intermediation costs, while large trades benefited from reductions in bargaining costs. Bonds experienced increases in trading volume across the liquidity spectrum. We find higher dealer capital commitment, longer intermediation chains, and fewer pre-arranged trades, all suggesting increased market-making incentives for dealers. These results are largely consistent with predictions from search-based models.
Chalmers, J., Liu, S. Y., & Wang, Z. J. (2021). The Difference a Day Makes: Timely Disclosure and Trading Efficiency in the Muni Market. Journal of Financial Economics, 139(1), pp. 313-335. Elsevier.
The definitive version is available at https://doi.org/10.1016/j.jfineco.2020.07.015
Business and Information Technology
Keywords and Phrases
Market Making; Municipal Market; Trading Volume; Transaction Costs; Transparency
International Standard Serial Number (ISSN)
Article - Journal
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01 Jan 2021