Abstract
Corporate bonds are traded at the Tel Aviv Stock Exchange like stocks, by a limit order book, with high investor participation and narrower spreads relative to the stock market. Using data with trader identification we focus on small retail investors. Their average execution costs (0.067%), which are lower than for stocks, are lower than half of the quoted spreads because they tend to act as makers or delay taking when spreads are high. These findings are in contrast to U.S. corporate bond OTC markets where corporate bond spreads are higher, retail participation is very low and trading costs are high.
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