The effects of price transparency in OTC equity lending marketsEvidence from a loan fee benchmark

Resumo

We study the effects of a positive shock in price transparency in the Brazilian OTC equity lending market. Before March 1st 2011, a publicly available benchmark was computed as the average loan fee across all loan deals over the previous 15 trading days; on March 1st 2011, this interval was reduced from 15 to three days, increasing the benchmark precision and, consequentially, short-sellers' predictive power over current (unobserved) loan fees. Using difference-in-differences analysis, we show that this change resulted in lower loan fees, with stronger effects for short-sellers with higher search costs. Our results are consistent with the theoretical predictions in Duffie, Dworczak, and Zhu (2017) and can be of interest to regulators few countries have publicly available loan fee benchmarks.

Ficha do documento

Tipo

Estudo

Ano

2020

Instituição

Escola de Economia de São Paulo

Fonte

Repositório da FGV

Idioma

Inglês

Acesso

Acesso aberto

Identificador

oai:repositorio.fgv.br:10438/28800

Temas

EconomiaGovernança

Palavras-chave

OTC marketsBenchmarksLoan feesShort-sellingSearch costsEquity lending marketsEconomiaMercado financeiroMercado de balcão