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
Date Written: 2018-08-30
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: Suggested Citation