Bond Liquidity and Dealer Inventories: Insights from US and European Regulatory Data

55 Pages Posted: 11 Mar 2020 Last revised: 1 Dec 2021

See all articles by Plamen Ivanov

Plamen Ivanov

Financial Conduct Authority

Alexei G. Orlov

Commodity Futures Trading Commission (CFTC)

Michael Schihl

Securities and Exchange Commission

Date Written: November 29, 2021

Abstract

Leveraging our access to both regulatory TRACE and ZEN, we construct a sample of approximately 30,000 corporate bonds traded in both relatively transparent (US) and relatively opaque (Europe) jurisdictions. We find that adding heretofore unobserved global trades to transactions that are publicly disseminated through TRACE affects the computation of bond liquidity, dealer inventories, and the relationship between the two. The direct and indirect evidence reported in this paper contributes to four strands of literature: effects of disclosure and transparency, fixed-income market structure and the role of dealers, cost of immediacy, and the effects of financial regulation on market quality.

Keywords: Corporate bond liquidity, dealer inventories, financial regulation, post-trade transparency, cost of immediacy

JEL Classification: G10, G12, G23, G14, G15, G18

Suggested Citation

Ivanov, Plamen and Orlov, Alexei G. and Schihl, Michael, Bond Liquidity and Dealer Inventories: Insights from US and European Regulatory Data (November 29, 2021). Available at SSRN: https://ssrn.com/abstract=3529801 or http://dx.doi.org/10.2139/ssrn.3529801

Plamen Ivanov

Financial Conduct Authority ( email )

25 The North Colonnade
Canary Wharf
London, E14 5HS
United Kingdom

Alexei G. Orlov (Contact Author)

Commodity Futures Trading Commission (CFTC) ( email )

1155 21st Street NW
Washington, DC 20581
United States

Michael Schihl

Securities and Exchange Commission ( email )

100 F Street NE
Washington, DC 20549
United States

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