Norman Schürhoff

All-to-All Liquidity in Corporate Bonds

We examine technology enabling dispersed investors to directly trade with each other in over-thecounter markets. The largest electronic trading platform in corporate bonds started Open Trading (OT) to allow investor-to-investor trading. Over our 2014-2018 sample OT grew to win 12% of trades on the platform, with 2% being investor-to-investor trading, 3% being dealers trading with new clients, and 7% being new liquidity providers acting like dealers. This suggests that investors in corporate bonds prefer intermediation to direct trade. However, OT can enable new dealers to compete in liquidity provision. We use an auction model together with OT’s steady growth to measure OT’s effect on investors, dealers, and competition to provide liquidity.