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An Empirical Analysis of Transparency-Related Characteristics of European and US Sovereign Bond Markets

Author

Listed:
  • Dunne, Peter

    (Queen’s University Belfast)

  • Moore, Michael J.

    (Queen’s University Belfast)

  • Portes, Richard

    (London Business School and CEPR)

Abstract

We examine transparency-related characteristics of European and US sovereign bond markets and relate these to differences in primary issuance approaches and the design of the different trading platforms. We highlight the existence of a winner’s curse problem in the interaction between B2C and B2B segments of the market, and we provide evidence to analyze its prevalence. We examine the problems that can arise as the result of increasing the transparency of the B2B segment of the market and use the experience of the eSpeed platform in the US to obtain insights into these effects. Our analysis is directly relevant to the policy debate about whether to apply MiFID transparency requirements to the EU sovereign bond markets: our results suggest great caution in creating an extremely homogenous and transparent trading environment for sovereign bonds.

Suggested Citation

  • Dunne, Peter & Moore, Michael J. & Portes, Richard, 2006. "An Empirical Analysis of Transparency-Related Characteristics of European and US Sovereign Bond Markets," Research Technical Papers 9/RT/06, Central Bank of Ireland.
  • Handle: RePEc:cbi:wpaper:9/rt/06
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    References listed on IDEAS

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    1. Michael J. Fleming, 2003. "Measuring treasury market liquidity," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 83-108.
    2. Naik, Narayan Y & Neuberger, Anthony & Viswanathan, S, 1999. "Trade Disclosure Regulations in Markets with Negotiated Trades," Review of Financial Studies, Society for Financial Studies, vol. 12(4), pages 873-900.
    3. Toni Gravelle, 1999. "The Market Microstructure of Dealership Equity and Government Securities Markets: How They Differ," CGFS Papers chapters,in: Bank for International Settlements (ed.), Market Liquidity: Research Findings and Selected Policy Implications, volume 11, pages 1-16 Bank for International Settlements.
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    5. Nimalendran, M. & Petrella, Giovanni, 2003. "Do 'thinly-traded' stocks benefit from specialist intervention?," Journal of Banking & Finance, Elsevier, vol. 27(9), pages 1823-1854, September.
    6. J.Ramon Martinez-Resano, 2005. "Size And Heterogeneity Matter. A Microstructure-Based Analysis Of Regulation Of Secondary Markets For Government Bonds," Finance 0508007, EconWPA.
    7. Muscarella, Chris J. & Piwowar, Michael S., 2001. "Market microstructure and securities values: : Evidence from the Paris Bourse," Journal of Financial Markets, Elsevier, vol. 4(3), pages 209-229, June.
    8. Flood, M.D. & Koedijk, C.G. & van Dijk, M.A. & van Leeuwen, I.W., 2002. "Dividing the Pie," ERIM Report Series Research in Management ERS-2002-101-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
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    Citations

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    Cited by:

    1. Richard Portes, 2010. "Comment on "Why the European Securities Market Is Not Fully Integrated"," NBER Chapters,in: Europe and the Euro, pages 283-286 National Bureau of Economic Research, Inc.
    2. Stefan Fiesel & Marliese Uhrig-Homburg, 2016. "Illiquidity Transmission in a Three-Country Framework: A Conditional Approach," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 17(3), pages 261-284, December.
    3. Schneider, Michael & Lillo, Fabrizio & Pelizzon, Loriana, 2016. "How has sovereign bond market liquidity changed? An illiquidity spillover analysis," SAFE Working Paper Series 151, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.

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