Price Manipulation in Parallel Markets with Different Transparency
We provide a unique test of trading behavior under asymmetric information with parallel markets characterized by different degrees of transparency for the same asset. We consider the Treasury bond market and show that the informed dealers simultaneously place bids in the primary market and sell in the secondary market, repurchasing when the primary market closes. Price manipulation increases market depth in the more transparent market when the more opaque market is open. This supports the experimental findings of Bloomfield and O'Hara and shows how the existence of less transparent markets may increase the liquidity of the more transparent ones.
When requesting a correction, please mention this item's handle: RePEc:ucp:jnlbus:v:78:y:2005:i:5:p:1625-1658. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division)
If references are entirely missing, you can add them using this form.