Secondary market disclosure

Information disclosure is an important condition for the smooth and efficient functioning of any capital market. Information disclosure improves market efficiency by increasing liquidity, matching investors to issuers by risk preferences, and leads to better price discovery. Secondary market continuing disclosure is an attempt to indirectly motivate state and local issuers to provide all the pertinent financial and operating condition information to municipal investors. Due to the segmented and loosely organized nature of the municipal over-the-counter (OTC) market, timely information discovery becomes a critical concern for several key municipal secondary market actors. Moreover, secondary market disclosure is important for price discovery in both secondary and primary transactions. For municipal bond issuers as well as underwriters, their primary market transactions will be affected by the dynamics in secondary trades. The OTC market structure and the resulting prices are associated with true interest costs, competition among underwriters for municipal bonds, and overall efficiency in the allocation of capital resources.