The Effects of Trade Transparency in the London Stock Exchange: A Summary
Posted: 15 Sep 1999
Date Written: January 1995
The quote-driven London Stock Exchange currently delays the publication of large trades for 90 minutes, while very large trades may be delayed for up to 5 days. In addition, market makers can trade with each other on an order-driven inter- dealer broker market that is inaccessible to other traders. This study examines the effects of the current opacity in the London equity market using data for a two year period (1992-94) from the UK equity and equity options markets. Data on 2.4 million trades in 42 stocks was used to compare the quoted and traded bid-ask spreads for different types and sizes of trade, movements in the inventories of market makers just before and 90 minutes after large trades, the price impact of large trades and the effect of large equity trades on volume in the corresponding stock option.
JEL Classification: G15
Suggested Citation: Suggested Citation