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Price Transparency in OTC Equity Lending Markets: Evidence from a Loan Fee Benchmark

Author

Listed:
  • Fabio Cereda

  • Fernando Chague

  • Rodrigo De Losso

  • Alan De Genaro

  • Bruno Giovannetti

Abstract

We study the effects of a price transparency shock in the Brazilian OTC equity lending market. Previously, a publicly available stock-specific loan fee benchmark was the average fee of the past 15 trading days. On March 1, 2011, this interval was reduced to 3 days, significantly improving short-sellers' ability to predict current loan fees. We find that loan fees fell, lending volume increased, total lending revenue remained stable, high-cost lenders lost market share, and price efficiency increased after the benchmark change. Only a few countries benefit from loan fee benchmarks and our results may be relevant to regulators.

Suggested Citation

  • Fabio Cereda & Fernando Chague & Rodrigo De Losso & Alan De Genaro & Bruno Giovannetti, 2020. "Price Transparency in OTC Equity Lending Markets: Evidence from a Loan Fee Benchmark," Working Papers, Department of Economics 2020_22, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2020wpecon22
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    2. Görgen, Maximilian & Jacob, Stefan & Rohleder, Martin & Wilkens, Marco, 2025. "The impact of ESG preferences on stock borrowing volumes and fees," Finance Research Letters, Elsevier, vol. 85(PD).
    3. Kohei Maehashi & Daisuke Miyakawa & Kana Sasamoto, 2026. "Pricing implications of centrality in an OTC derivative market: an empirical analysis using transation-level CDS data," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Statistics and beyond: new data for decision making in central banks, volume 66, Bank for International Settlements.

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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
    • G19 - Financial Economics - - General Financial Markets - - - Other

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