Information and Liquidity of OTC Securities: Evidence from Public Registration of Rule 144a Bonds

46 Pages Posted: 17 Sep 2018 Last revised: 21 Feb 2019

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: 2018-08-30

Abstract

The Rule 144A private debt represents a significant and growing segment of the U.S. bond market. This paper examines the market liquidity effects of enhanced information disclosure induced by the public registration of 144A bonds. 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, Public registration, Information disclosure, Broker-dealers, Liquidity

JEL Classification: G12, G14

Suggested Citation

Han, Song and Huang, Alan G. and Kalimipalli, Madhu and Wang, Ke, Information and Liquidity of OTC Securities: Evidence from Public Registration of Rule 144a Bonds (2018-08-30). FEDS Working Paper No. 2018-061. Available at SSRN: https://ssrn.com/abstract=3245055 or http://dx.doi.org/10.17016/FEDS.2018.061

Song Han (Contact Author)

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

Board of Governors of the Federal Reserve System ( email )

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

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