CFA Level I · CFA Level I Exam · Fixed-Income Issuance and Trading
An investor wants to sell a large block of an illiquid corporate bond without moving the price. The venue most likely to help is:
A dark pool or all-to-all platform that matches natural buyers and sellers is most likely to help, because it limits information leakage and price impact on large illiquid blocks. Primary auctions apply to new issues, and displaying the full size on an order book moves prices.
- Aa dark pool or all-to-all platform that matches natural counterpartiesCorrect
- Ba primary-market auction conducted by the original underwriters
- Ca continuous exchange order book displaying the full order size
Explanation
Platforms that match natural buyers and sellers, including all-to-all trading and non-displayed venues, can lessen price impact for large illiquid blocks. A primary auction applies to new issues, and displaying the full size on an order book signals intent and tends to move the price against the seller.
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