What Makes When‐Issued Trading Attractive to Financial Markets?

27 Pages Posted: 29 Oct 2014

See all articles by Raymond M. Brooks

Raymond M. Brooks

Oregon State University - College of Business

Yong H. Kim

University of Cincinnati

J. Jimmy Yang

Oregon State University - College of Business

Date Written: December 2014

Abstract

When‐issued trading is the trading of securities prior to the actual issue of the security. When‐issued trading is active around the world and in a variety of equity and bond markets. In this survey, we provide a general description of when‐issued trading, analyze benefits and costs in various financial markets, present existing theoretical models and predictions, and synthesize empirical findings. We find that when‐issued trading promotes price discovery, mitigates information asymmetry, provides convenience for trading ahead of the actual issue of the security, and in some markets reduces volatility. In addition, we offer policy implications and suggest directions for further research in this area.

Keywords: When‐issued trading, stock splits, spinoffs, IPOs, bankruptcy, Treasury bills

JEL Classification: G10, G14, G15

Suggested Citation

Brooks, Raymond M. and Kim, Yong H. and Yang, J. Jimmy, What Makes When‐Issued Trading Attractive to Financial Markets? (December 2014). Financial Markets, Institutions & Instruments, Vol. 23, Issue 5, pp. 245-271, 2014, Available at SSRN: https://ssrn.com/abstract=2516091 or http://dx.doi.org/10.1111/fmii.12020

Raymond M. Brooks (Contact Author)

Oregon State University - College of Business ( email )

200 Bexell Hall Dept. of Accounting, Finance, International Management
Corvallis, OR 97331
United States
541-737-3687 (Phone)

Yong H. Kim

University of Cincinnati ( email )

Lindner College of Business
410 Carl H. Lindner Hall, P.O. Box 210195
Cincinnati, OH 45221
United States
513-556-7084 (Phone)
513-556-0979 (Fax)

J. Jimmy Yang

Oregon State University - College of Business ( email )

School of Accounting, Finance, and Information Sys
426 Austin Hall
Corvallis, OR 97331
United States
541-737-6005 (Phone)
541-737-4890 (Fax)

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