The Electronic Evolution of Corporate Bond Dealers

59 Pages Posted: 4 Jun 2020

See all articles by Maureen O'Hara

Maureen O'Hara

Cornell University - Samuel Curtis Johnson Graduate School of Management

Xing (Alex) Zhou

Board of Governors of the Federal Reserve System

Date Written: May 8, 2019

Abstract

Technology transformed the trading of financial assets but has been slower to come to corporate bond trading. Combining proprietary data from MarketAxess with regulatory TRACE data, we investigate how electronic request for quote (RFQ) trading affects bond dealers and trading more generally. We demonstrate that electronic trading remains fairly small and segmented, but has wide-ranging effects on transaction costs and execution quality in both electronic and voice trading, and the inter-dealer market. We identify features particular to bond markets that have and may continue to limit electronic bond trading growth. We provide an intriguing portrait of a market in transition.

Keywords: Electronic trading, Voice trading, RFQ, Corporate bond markets, Bond dealers, Transaction costs, Execution quality, Inter-dealer trade, Rating downgrade

JEL Classification: G14, G21, G23, G24

Suggested Citation

O'Hara, Maureen and Zhou, Xing (Alex), The Electronic Evolution of Corporate Bond Dealers (May 8, 2019). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3596139

Maureen O'Hara

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States
607-255-3645 (Phone)
607-255-5993 (Fax)

Xing (Alex) Zhou (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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

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