Do municipal bond dealers give their customers 'fair and reasonable' pricing?

John M. Griffin, Nicholas H. Hirschey, Samuel Kruger

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)


Municipal bonds exhibit considerable retail pricing variation, even for same-size trades of the same bond on the same day, and even from the same dealer. Markups vary widely across dealers. Trading strongly clusters on eighth price increments, and clustered trades exhibit higher markups. Yields are often lowered to just above salient numbers. Machine learning estimates exploiting the richness of the data show that dealers that use strategic pricing have systematically higher markups. Recent MSRB rules have had only a limited impact on markups. While a subset of dealers focus on best execution, many dealers appear focused on opportunistic pricing.
Original languageEnglish
Pages (from-to)887-934
JournalThe Journal of Finance
Issue number2
Publication statusPublished - Apr 2023


  • Municipal bonds
  • markups
  • price clustering
  • opportunistic pricing


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