Trading Disclosure Requirements and Market Quality Tradeoffs

Antonio Mele and Francesco Sangiorgi

No 20-118, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We analyze the effects of trading disclosure requirements in markets with insider traders and professional investors. The insiders garble their trading throughout a mixed strategy. A number of differentially informed professional investors acquire information and contribute to increased mar- ket efficiency. A “reform” introducing post-trade transparency leads these professional investors to acquire less information and, then, to trade less, contributing to less price discovery. This information crowding-out may be so strong to neutralize the generally positive effects related to public disclosure or to harm market quality, resulting in diminished liquidity and informationally less efficient market.

Keywords: post-trade transparency; information crowding-out (search for similar items in EconPapers)
JEL-codes: D82 G14 G18 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2020-08
New Economics Papers: this item is included in nep-mic, nep-mst and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp20118

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