Information and Liquidity of Over-the-Counter Securities: Evidence from Public Registration of Rule 144A Bonds

56 Pages Posted: 12 Jun 2017 Last revised: 27 May 2018

See all articles by Song Han

Song Han

Federal Reserve Board - Division of Research and Statistics

Alan Guoming Huang

University of Waterloo

Madhu Kalimipalli

Lazaridis School of Business and Economics, Wilfrid Laurier University

Ke Wang

Board of Governors of the Federal Reserve System

Date Written: May 5, 2018

Abstract

This paper examines the market liquidity effects of enhanced information induced by the public registration of 144A bonds, a significant and growing segment of the U.S. bond market. Using the regulatory version of TRACE data for the period 2002-2013, we find that following public registration of 144A bonds, dealer-specific effective bid-ask spreads narrow, especially for issues with higher ex-ante information asymmetry. Our results are consistent with existing theories that disclosure reduces information risk and thus improves market liquidity.

Keywords: Rule 144A bond, broker-dealers, public registration, liquidity, information disclosure

JEL Classification: G12, G14

Suggested Citation

Han, Song and Huang, Alan G. and Kalimipalli, Madhu and Wang, Ke, Information and Liquidity of Over-the-Counter Securities: Evidence from Public Registration of Rule 144A Bonds (May 5, 2018). Available at SSRN: https://ssrn.com/abstract=2913865 or http://dx.doi.org/10.2139/ssrn.2913865

Song Han

Federal Reserve Board - Division of Research and Statistics ( email )

20th & C. St., N.W.
Washington, DC 20551
United States
202-736-1971 (Phone)
202-452-3891 (Fax)

Alan G. Huang

University of Waterloo ( email )

School of Accounting and Finance
Waterloo, Ontario N2L 3G1
Canada
519-888 4567 ext. 36770 (Phone)

Madhu Kalimipalli

Lazaridis School of Business and Economics, Wilfrid Laurier University ( email )

Waterloo, Ontario N2L 3C5
Canada
519-884-0710 (Phone)

HOME PAGE: http://www.madhukalimipalli.com/

Ke Wang (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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