Relative Efficiency and Price Discovery in the Two-Tier Brussels Stock Exchange

Abstract Until the mid-90s, the more active among the Brussels-listed stocks were traded in parallel segments: \spot" (that is, with t + 3 settlement) and \forward" (with periodic settlement at the end of a two- or three-week period). The forward market was cheaper, deeper, unhampered by price limits, convenient also for shortsales, and played by the pros; so it looks likely to be the more ecient,tier. Yet a simple variance comparison, after correcting for settlement eects, nds,no such eect; in fact, the forward market may actually have been the more noisy one. Going on to the issue of price discovery, which is a more formal way of testing whether the