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Pre-trade transparency in opaque dealer markets

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  • Hu, Xiaolu
  • Venkatesan, Shyam
  • Fang, Yvonne

Abstract

This paper investigates the causal impact of pre-trade transparency on market liquidity in an over-the-counter-style market, leveraging a natural experiment in China's interbank corporate bond market. We find that turnover, market liquidity, and bond returns declined significantly when regulators unexpectedly suspended real-time quote dissemination in March 2023. Consistent with our expectation, these effects were mainly focused on interbank bonds, not exchange bonds, and concentrated among lower-rated, longer-maturity, and more frequently traded bonds. This study contributes novel evidence to the transparency literature and provides insights for policymakers in emerging markets, weighing the trade-offs between data governance and market efficiency.

Suggested Citation

  • Hu, Xiaolu & Venkatesan, Shyam & Fang, Yvonne, 2026. "Pre-trade transparency in opaque dealer markets," Pacific-Basin Finance Journal, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:pacfin:v:99:y:2026:i:c:s0927538x26001794
    DOI: 10.1016/j.pacfin.2026.103233
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    Keywords

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    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
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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