The Difference a Day Makes: Timely Disclosure and Trading Efficiency in the Muni Market

57 Pages Posted: 31 May 2016 Last revised: 2 Mar 2020

See all articles by John Chalmers

John Chalmers

University of Oregon

Steve Liu

University of Oregon

Zhi Jay Wang

University of Oregon - Charles H. Lundquist School of Business

Date Written: February 28, 2020

Abstract

The Real-Time Transaction Reporting System (RTRS) reduced the delay in reporting municipal bond trades from one-day to 15 minutes. We find a significant reduction in secondary market trading costs after the introduction of the RTRS. Our estimates imply that retail investors benefited primarily from reduced dealer intermediation costs, while large trades benefited from reductions in bargaining costs. Bonds experienced increases in trading volume across the liquidity spectrum. We find higher dealer capital commitment, longer intermediation chains, and fewer pre-arranged trades, all suggesting increased market-making incentives for dealers. These results are largely consistent with predictions from search-based models.

Keywords: Transparency, Municipal Market, Transaction Costs, Trading Volume, Market Making

JEL Classification: G14, G18, G28

Suggested Citation

Chalmers, John and Liu, Steve and Wang, Zhi Jay, The Difference a Day Makes: Timely Disclosure and Trading Efficiency in the Muni Market (February 28, 2020). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2786420 or http://dx.doi.org/10.2139/ssrn.2786420

John Chalmers

University of Oregon ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States
541-346-3337 (Phone)

Steve Liu

University of Oregon ( email )

1280 University of Oregon
Eugene, OR 97403
United States

Zhi Jay Wang (Contact Author)

University of Oregon - Charles H. Lundquist School of Business ( email )

1208 University of Oregon
Eugene, OR 97403-1208
United States

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