Implication of Mandatory Trading Report: Evidence from the Thai Bond Market
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Abstract
Motivated by mixed evidence on market transparency and two regulatory changes introduced by the Thai Bond Market Association (ThaiBMA) in 2006 and 2009, this study examines their effects on bond liquidity and extreme price jumps. The 2006 regulation required the reporting of trading information within 30 minutes, and the 2009 regulation imposed penalties for late, erroneous, or missing reports. Using 745,911 Thai government bond transactions from 2002 to 2019, we find that mandatory reporting reduced average reporting delays by about 49–59 seconds, while the introduction of penalties reinforced compliance. Liquidity improved, with the 2006 regulation linked to a 46 basis point increase in turnover, although effects after 2009 were less pronounced. Most strikingly, the frequency of extreme price jumps declined sharply: only one weekly jump was detected across four actively traded bonds after 2006, compared with frequent jumps beforehand. These results demonstrate that even modest improvements in reporting timeliness can enhance transparency, strengthen investor confidence, and reduce tail-risk exposure. Overall, regulatory enforcement contributed to more stable market conditions and may lower the cost of capital in emerging bond markets.
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