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Information and Liquidity of OTC Securities : Evidence from Public Registration of Rule 144A Bonds

Author

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  • Song Han
  • Alan G. Huang
  • Madhu Kalimipalli
  • Ke Wang

Abstract

The Rule 144A private debt represents a significant and growing segment of the U.S. bond market. This paper examines the market liquidity effects of enhanced information disclosure induced by the public registration of 144A bonds. Using the regulatory version of TRACE data for the period 2002-2013, we find that following public registration of 144A bonds, dealer-specific effective bid-ask spreads narrow, especially for issues with higher ex-ante information asymmetry. Our results are consistent with existing theories that disclosure reduces information risk and thus improves market liquidity.

Suggested Citation

  • Song Han & Alan G. Huang & Madhu Kalimipalli & Ke Wang, 2018. "Information and Liquidity of OTC Securities : Evidence from Public Registration of Rule 144A Bonds," Finance and Economics Discussion Series 2018-061, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2018-61
    DOI: 10.17016/FEDS.2018.061
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    1. Keßler, Andreas & Mählmann, Thomas, 2022. "Trading costs of private debt," Journal of Financial Markets, Elsevier, vol. 59(PB).

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    More about this item

    Keywords

    Rule 144A bond; Public registration; Information disclosure; Broker-dealers; Liquidity;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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    This paper has been announced in the following NEP Reports:

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