Market Transparency

Abstract This chapter discusses the issue of transparency in securities markets. It covers pre-trade transparency, post-trade transparency, and disclosure of traders’ identities. It demonstrates that transparency about quotes, orders, and traders’ presumed trading motives generally enhances market liquidity, at least as far as uninformed traders are concerned. However, it also highlights that some forms of opaqueness do have merits. The chapter also addresses the question of why markets are so opaque.