文档介绍：Consolidation,
Fragmentation, and the
Disclosure of Trading
Information,
Ananth Madhavan
University of Southern California
It monly believed that fragmented security
markets have a natural tendency to consolidate.
This article examines this belief, focusing on the
effect of disclosing trading information to mar-
ket participants. We show that large traders who
place multiple trades can benefit from the ab-
sence of trade disclosure in a fragmented mar-
ket, as can dealers who face less price? compe-
tition than in a unified market. Consequently, a
fragmented market need not coalesce into a sin-
gle market unless trade disclosure is mandatory.
We pare and contrast fragmented and
consolidated markets. Fragmentation results in
higher price volatility and violations of price ef-
ficiency.
This article analyzes the impact on price information
and market fragmentation of rules requiring the timely
disclosure of trading information to market partici-
The issue of trade disclosure (one aspect of
“market transparency”) lies at the. heart of many recent policy debates
concerning the structure of securities markets, but is also important
for theoretical reasons.
From a practical viewpoint, differences in trade disclosure between
markets may induce order flow migration, affecting liquidity and the
cost of trading. For example, the London Stock Exchange allows deal-
ers to delay the disclosure of large trades by 90 The absence
of transparency in London, it is argued, has attracted order flow from
other markets where disclosure rules are more stringent.’ The lack of
trade disclosure is also a major concern of policy makers for markets
without formal mechanisms for trade disclosure (., the corporate
junk bond markets) and markets in emerging economies.
Trade disclosure is also important for theoretical reasons. Several
articles argue that consolidation is inevitable because traders gravitate
to the most liquid and ef