Impact of Electronic Trading Platforms on the Brokered Interdealer Market for Government of Canada Benchmark Bonds
AbstractThis study examines the impact of increased transparency, brought about by the introduction of three electronic trading systems, on the brokered interdealer market for Government of Canada benchmark securities. Using the CanPX dataset for the 2-, 5-, 10-, and 30-year benchmarks, the paper finds some evidence of decreased bid-ask spreads for the 30-year benchmark in the months following the introduction of the electronic platforms. Bid-ask spreads are not significantly different in the pre- and post-transparency periods for the 2-, 5- or 10-year benchmarks. The price-impact coefficient, calculated using dollar value as a measure of order flow, also decreased in the post-event period for the 30-year benchmark but is not statistically different for any of the other benchmarks. Overall, there is little evidence that liquidity improved or was lowered by the introduction of the electronic systems.
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Bibliographic InfoPaper provided by Bank of Canada in its series Working Papers with number 07-5.
Length: 41 pages
Date of creation: 2007
Date of revision:
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Financial markets; Market structure and pricing;
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-02-17 (All new papers)
- NEP-MKT-2007-02-17 (Marketing)
- NEP-MST-2007-02-17 (Market Microstructure)
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