Trade Disclosure Regulation in Markets with Negotiated Trades

Narayan Y. Naik; Anthony Neuberger; Siva Viswanathan

doi:10.1093/rfs/12.4.873

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Trade Disclosure Regulation in Markets with Negotiated Trades

Narayan Y. Naik^1,2; Anthony Neuberger^3,2; Siva Viswanathan^3,4

¹ London School of Business and Finance · ² London Business School · ³ Duke University · ⁴ City, University of London

Review of Financial Studies 1999

In dealership markets disclosure of size and price of details of public trades is typically incomplete. We examine whether full and prompt disclosure of public-trade details improves the welfare of a risk-averse investor. We analyze a model of dealership market where a market maker first executes a public trade and then offsets her position by trading with other market makers. We distinguish between quantity risk and price revision risk. We show that if the market maker learns some information about the motive behind public trade, neither regime is unambiguously welfare superior. This is because greater transparency improves quantity risk sharing but worsens price revision risk sharing.

DOI: 10.1093/rfs/12.4.873
Volume: 12 (4)
Pages: 873-900
Language: en
Export: BibTeX
Sources: openalex crossref