Customer Liquidity Provision: Implications for Corporate Bond Transaction Costs

The authors are grateful to Scott Bauguess, Andrew Chen, Darrell Duffie, Larry Harris, Erik Heitfield, Terrence Hendershott, Edith Hotchkiss, Stacey Jacobsen, Yoshio Nozawa, Elvira Solji, Clara Vega, and Brian Weller as well as conference and seminar participants at the Bank of Canada, the Commodity Futures Trading Commission, the Securities and Exchange Commission, 2017 China International Conference in Finance, the 2017 European Finance Association Annual Meeting, the 2018 American Finance Association Annual Meeting, the Workshop on Investor Behavior and Market Liquidity, and the Women in Microstructure Meeting for their comments and discussions. The authors also thank Will Kuchinski and Darrell Ashton for providing code for cleaning the TRACE data. Earlier drafts of this paper have circulated under the title “Customer Liquidity Provision in Corporate Bond Markets.” The views expressed in this article are solely those of the authors and should not be interpreted as reflecting the views of the Federal Reserve Board or the Federal Reserve System.