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Liquidity of Last Resort: The Role of X-Bond Trading in the Chinese Government Bond Market
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DOI：10.1016/j.jbankfin.2026.107722.png)
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Abstract
En 中文
Traditional negotiation trading dominates the electronic limit order book (LOB) of the X-Bond platform in the Chinese government bond market. Using a unique dataset, we conduct the first systematic study of the X-Bond’s role. We find that: (1) trades via LOB are notably more cost effective than via negotiation, with cost differences influenced by factors such as trader groups, bond types, trade sizes, and on-/off-the-run status; (2) electronic trading reduces the costs of negotiation trades through increased liquidity, an information channel, and a liquidity’s externality; and (3) due to the absence of an interdealer market, the X-Bond platform primarily serves as a liquidity source of last resort for managing inventory risk.
Keywords:
Electronic limit order book
Negotiation trading
Liquidity provision
Government bond market
X-Bond platform
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