This article explores a new channel through which exchange-traded funds (ETFs) can affect underlying asset prices. In over-the-counter markets, daily disclosure of ETF portfolio holdings increases price transparency and therefore retail investors’ bargaining power. I show that ETF-held municipal bonds have significantly lower dealer markups than observationally similar non-ETF-held bonds. This effect cannot be explained by bond selection or ETFs’ own trading activity. Rather, ETFs’ disclosure of end-of-day bond pricing is associated with lower retail markups by 5–9 basis points.

This paper documents a non-monotonic impact of local mutual funds on the pricing of municipal bond issuance. Offering yield spreads are higher in states where municipal bond funds’ headquarters are located, and in states with larger aggregate local fund size. However, controlling for local fund size, yield spreads decrease as the number of local fund families increases. These findings are consistent with a security pricing model with multiple imperfectly informed investors and with the empirical evidence supporting local funds’ informational advantage. Specifically, mutual fund trades predict local bonds’ credit rating changes.