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Do regulations decrease dealer ability to intermediate trades? Using a unique data set of dealer-bond-level transactions, we link changes in liquidity of individual U.S. corporate bonds to dealers’ transaction activity and balance sheet constraints. We show that, prior to the financial crisis, bonds traded by more levered institutions and institutions with investment-bank-like characteristics were more liquid but this relationship reverses after the financial crisis. In addition, institutions that face more regulations after the crisis both reduce their overall volume of trade and have less ability to intermediate customer trades..

• G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
• G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
• G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

• Bonds
• Corporate bonds
• Financial Regulatory Reform (Dodd-Frank Act)
• Financial market regulatory reform
• Liquidity (Economics)
• Regulatory reform

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