Trade Disclosure Regulation in Markets with Negotiated Trades

Posted: 3 Jun 1999

See all articles by Narayan Y. Naik

Narayan Y. Naik

London Business School - Institute of Finance and Accounting

S. Viswanathan

Duke University - Fuqua School of Business; Duke University - Department of Economics

Anthony Neuberger

City University London - Faculty of Finance

Abstract

In dealership markets disclosure of size and price 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 analyse 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.

JEL Classification: G12, G14

Suggested Citation

Naik, Narayan Y. and Viswanathan, S. and Neuberger, Anthony, Trade Disclosure Regulation in Markets with Negotiated Trades. Review Of Financial Studies, Vol. 12, Issue 3, 1999. Available at SSRN: https://ssrn.com/abstract=161622

Narayan Y. Naik

London Business School - Institute of Finance and Accounting ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom
+44 20 7262 5050 (Phone)
+44 20 724 3317 (Fax)

S. Viswanathan (Contact Author)

Duke University - Fuqua School of Business ( email )

Durham, NC 27708-0120
United States
919-660-7784 (Phone)
919-684-2818 (Fax)

Duke University - Department of Economics

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

Anthony Neuberger

City University London - Faculty of Finance ( email )

London, EC2Y 8HB
Great Britain

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