More public dissemination of information on executed municipal bond trades wouldn’t completely close the price advantage institutional investor have over retail investors, a new study says.
There should be renewed focus on regulatory efforts aimed at further enhancing municipal bond market efficiency, said Komla Dzigbede, an economist at the State University of New York at Binghamton, who spoke of her research paper on the topic on Monday at a Brookings Institution seminar.
The municipal bond expert also called for deeper investor education in municipal bonds by the Securities and Exchange Commission.
As complex, sophisticated muni debt instruments proliferate, Dzigbede said social media is needed to provide wider reach to retail investors and provide them with speedier answers.
He claimed research has shown MSRB’s EMMA has reduced, but not eliminated the price advantage institutional investors have over moms and pops in muni bonds
The price advantage raises equity and citizen-welfare implications, he contended.
“Institutional investors as more informed than retail investors because institutions can collect price quotes from more dealers and are more aware of trade prices that other institutions pay,” Dzigbede said.