6.V What is the optimal degree of equity post-trade transparency?

What is the ‘optimal degree’ of equity post-trade transparency? Leading determinants for the optimal degree of equity post-trade transparency are considered to be (1) liquidity and (2) investor protection.1 Thus, the optimal degree of equity post-trade transparency is one that supports the most optimal amount of liquidity and investor protection.2

Generally, those investors who know least about market conditions most favour post-trade transparency, often being retail investors. Those investors who know most, usually being professional investors, oppose post-trade transparency with respect to their own situation.3 Post-trade transparency would reduce their informational advantage. In addition, liquidity providers want to rebalance their position before the broader market finds out (see paragraph above). That being said, professional investors (including liquidity providers) want to see post-trade information of others, as it enables them to observe the market.4 These elements are mere generalizations and are difficult to apply in practice. The ambiguous nature of post-trade transparency (i.e. post-trade transparency can both support and reduce liquidity) makes it difficult to ensure an outcome that results in optimal liquidity and investor protection. Different types of investors, but also different types of financial instruments (e.g. liquid versus illiquid), make it hard to assess what degree of equity post-trade transparency is actually ‘optimal’.