Theory and Results on Transparency

Abstract

A trading mechanism can be thought of as a set of protocols that translates investors’ latent demands into realised prices and quantities. Market transparency is essentially the ability of market participants to observe the information in the trading process, and transparency can be defined as ‘the degree to which information about trading (both past and prospective) is made publicly available on a real-time basis’ (IOSCO, 1993).This publication of trading information for transparency reasons is distinct from the confidential reporting of trades to the exchange and regulatory authorities for surveillance or settlement purposes.