The Informational Content of Trades on the EuroMTS Platform

This paper presents unambiguous evidence that trading European government securities on EuroMTS contributes to determine their (unobservable) efficient price. Using twenty-seven months of daily transaction prices data for 107 bonds issued by eleven European governments, the estimated EuroMTS market's contribution to price discovery is about 20 percent, on average. Further, the amount of price discovery turns out to be strongly related to trading activity and price volatility conditions even controlling for institutional factors and for the maturity of bonds. Overall, the empirical evidence suggests that trades conveying information occur on EuroMTS when the level of liquidity is sufficiently high