Corporate and Municipal Bond Market Microstructure in the U.S.

Piwowar, Michael S.

doi:10.1007/978-1-4419-7701-4_6

Cited by 2 publications

(1 citation statement)

References 40 publications

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“…In the USA, the SEC continues to lead sound regulatory reforms and supports the MSRB with the legal mandate to promote fair issuance and trading practices to enhance municipal market efficiency. The SEC worked with the MSRB and the FINRA to make effective on May 14, 2018, rule amendments regarding markup disclosures, which require dealers to disclose their compensation for certain retail customer transactions and let investors know how much they are paying for municipal securities transactions (Piwowar, 2018; Municipal Securities Rulemaking Board, 2019).…”

Section: Discussion and Regulatory Policy Considerationsmentioning

confidence: 99%

Disclosure-based regulation and municipal security trade prices

Dzigbede

2024

JFEP

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Purpose This paper aims to measure the trade price impact of a recent regulatory disclosure intervention in municipal securities secondary markets, which required broker-dealers to disclose securities trading information on a near-real-time and continuing basis. Design/methodology/approach The author analyzes trade price outcomes in the preintervention and postintervention regimes using a suite of time series estimations that give heteroskedasticity-robust standard errors (Prais–Winsten and Cochrain–Orcutt), accommodate higher-order lag structure in the error term (autoregressive integrated moving average) and account for volatility clustering in the time series (generalized autoregressive conditional heteroskedasticity). Findings Results show that regulatory disclosure intervention significantly improved trade price efficiency in municipal securities secondary markets as daily trade price differential and volatility both declined market-wide after the disclosure intervention. Research limitations/implications The sample consists of trades in State of California general obligation bonds; therefore, empirical findings may not be generalizable to other states, local governments and different types of bonds. Practical implications The findings highlight voluntary information disclosure as a practical and effective mechanism in disclosure regulation of municipal securities secondary markets. Originality/value Only a small body of work exists that examines information disclosure regulation in municipal securities secondary markets; therefore, this paper expands knowledge on the topic and should provide renewed impetus for regulatory efforts aimed at improving the efficiency of municipal capital markets.

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Section: Discussion and Regulatory Policy Considerationsmentioning

confidence: 99%