“Market transparency” has to do with the amount of information about the market that is available to market participants. Broadly speaking, “market transparency” can be broken down into two categories:
- pre-trade transparency - refers to information about the prices at which trades can be executed- i.e. the bid and offer prices and sizes (also known as volumes) in which market participants are willing to trade. Pre-trade prices can be indicative or firm.
- post-trade transparency - refers to information about the prices and volumes of trades that have already taken place.
The amount of pre-trade and post-trade transparency available to market participants can vary significantly from market to market, both in terms of:
- the kind of information is available – there tends to be greater transparency in retail markets than in wholesale markets. Additionally, some markets such as equity markets tend to have much greater levels of both pre- and post-trade transparency than other markets such as bond markets and over the counter (“OTC”) derivative markets.
- how frequently it is made available - information can be made available on a real-time basis (i.e. it updates as dealing interest changes) or it can be made available on a delayed basis (i.e. some time after the trade has been executed).
See also: MiFID II/R Working Group page.