Review of Finance Vol. 29 No. 4 2025
Exchange-traded funds and transparency in over-the-counter markets
open access
Abstract
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.
- DOI
- 10.1093/rof/rfaf019
- Volume
- 29
- Issue
- 4
- Pages
- 1043-1065
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref