What Is Price Transparency?

The transparency of the instruction book refers to the real-time disclosure of the price and quantity of buyer (sell) declaration instructions by the exchange, which is an important part of the transparency of the stock market transactions. In terms of market rule design, many exchanges around the world have reformed the rules of order book transparency. For example, the New York Stock Exchange introduced the OpenBook system in 2002, making all the limited price order book information available to all investors, which greatly increased market transparency (Boehmer, Saar and Yu (2005)); the Sydney Futures Exchange in 2001 The order book disclosure scope has been expanded from the best quote to the best three grades of quotes (Bortoli, Frino, Jarnecic, etc. (2006)); the Toronto Stock Exchange increased the transparency of the order book in 1990, and expanded from providing only the best quote to providing The real-time five-level bid and offer quotes of the best quotes are based on their entrusted quantities (Madhavan, Porter, and Weaver (2005). The reforms of exchanges in various countries tend to improve market transparency, but whether the higher the market transparency is, the better the market order should be. The extent to which the books are made public is not the same in each country's policy practice, and has been modified in many exchanges.

Instruction book transparency

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The transparency of the instruction book refers to the real-time disclosure of the price and quantity of buyer (sell) declaration instructions by the exchange, which is an important part of the transparency of the stock market transactions. In terms of market rule design, many exchanges in the world

The so-called market transparency refers to the ability of market participants to observe market transaction process information, including pre-transaction transparency and post-transaction transparency. The former refers to the extensive disclosure of pre-trade information such as real-time bid and offer quotes, market depth, and other limit orders that are not at the best price; the latter refers to past transaction information (including transaction time, transaction volume, and transaction price, etc.) ) Public and timely disclosure. In the order-driven market, the limit order book is the most important channel for investors to observe pre-trade information. The amount of information disclosed in the order book, that is, the transparency of the order book, will directly affect investors' trading behaviors and trading strategies, thereby affecting market efficiency . However, the empirical research on this issue has different conclusions. Hendershott and Jones (2005) found that when the Island ECN electronic trading system in the United States stopped publishing limit order book information for exchange-traded funds (ETFs), the price adjustment of these funds became slower and transaction costs increased; After the release of relevant order book information, the market quality has improved. Boehme: et al. (2005) found that the New York Stock Exchange introduced OpenBook Serviee, that is, after the information of the order book was disclosed to investors, the investor's order submission strategy changed, and they tended to submit smaller orders And the speed of cancellation of the order has also accelerated; the liquidity of the market has increased, and the validity of the price information has also improved. Although the above studies all believe that the improvement of market transparency helps to improve the market quality, empirical research by Madhavan et al. (2005) found that with the improvement of the transparency of the Toronto Stock Exchange, market liquidity has decreased, the execution cost of orders and the market's Increased volatility. Comerton-Forde et al. (2005) 's empirical research on the purely command-driven markets of Paris, Tokyo, and South Korea also found that with the increase of anonymity of orders, market liquidity increased. Foueault et al. (2007) 's research on the Paris Stock Exchange also confirmed that when the identity information of the submitter of the limit order was canceled (that is, the transparency of the order book decreased), the bid-ask spread decreased significantly.

1 . "Review on the Limit Order Book and Order-Driven Market Research" [J] .Journal of Xiamen University.2011 Issue 6 ^[1]