To disclose or not to disclose: transparency and liquidity in the structured product market : [Version 5 Mai 2014]

  • We use a unique data set from the Trade Reporting and Compliance Engine (TRACE) to study liquidity effects in the US structured product market. Our main contribution is the analysis of the relation between the accuracy in measuring liquidity and the potential degree of disclosure. Having access to all relevant trading information, we provide evidence that transaction cost measures that use dealer specific information such as trader identity and trade direction can be efficiently proxied by measures that use less detailed information. This finding is important for all market participants in the context of OTC markets, as it fosters our understanding of the information contained in transaction data. Thus, our results provide guidance for improving transparency while maintaining trader confidentiality. In addition, we analyze liquidity in the structured product market in general and show that securities that are mainly institutionally traded, guaranteed by a federal authority, or have low credit risk, tend to be more liquid.

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Author:Nils Friewald, Rainer Jankowitsch, Marti G. SubrahmanyamORCiDGND
Parent Title (English):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 461
Series (Serial Number):CFS working paper series (461)
Publisher:Center for Financial Studies
Place of publication:Frankfurt, M.
Document Type:Working Paper
Year of Completion:2014
Year of first Publication:2014
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2014/07/29
Tag:OTC markets; TRACE; liquidity; structured products; transparency
Issue:Version 5 Mai 2014
Page Number:43
First Version: May 15, 2012. This Version: May 5, 2014
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht