Asymmetries of Information in Electronic Systems

Nicolas Boccard () and Riccardo Calcagno ()
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Riccardo Calcagno: CentER, Tilburg University

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: We study the efficiency of the equilibrium price in a centralized, order-driven market where asymmetrically informed traders are active for several periods and can observe each other current and past orders, as in electronic systems of trading. We show that the more precise the information the higher the incentive to reveal it in the first trading rounds. On the contrary, strategic competition forces the less informed trader to wait the end of the trading period to reveal his information. This implies that when differences in information quality are very important, the liquidity of the market decreases as we approach the date of public revelation. We are able to show that more transparent markets as the ones organized via electronic systems are not performing better than markets organized on floor trade in terms of revelation of information, due to the oligopolistic behavior of insiders

Keywords: asymmetric information; liquidity; insider trading; strategic revelation (search for similar items in EconPapers)
JEL-codes: D43 G14 (search for similar items in EconPapers)
Date: 2001-07-01
New Economics Papers: this item is included in nep-mic
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