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
Date Written: February 28, 2020
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: Suggested Citation