
Contents
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Types of Market Information Types of Market Information
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Pre-trade Transparency Pre-trade Transparency
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Order-Driven Price Discovery Order-Driven Price Discovery
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Quote-Driven Price Discovery Quote-Driven Price Discovery
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Hybrid Markets Hybrid Markets
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Markets without Price Discovery Mechanisms Markets without Price Discovery Mechanisms
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Post-trade Transparency Post-trade Transparency
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Justifications for Regulation Justifications for Regulation
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Competition among Market Centers Competition among Market Centers
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Fragmentation Fragmentation
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Internalization Internalization
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Adverse Selection Adverse Selection
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Market Impact Market Impact
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Regulation of Market Information Regulation of Market Information
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Equity Securities Equity Securities
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Post-trade Transparency Post-trade Transparency
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Pre-trade Transparency Pre-trade Transparency
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Dissemination and Display of Market Data Dissemination and Display of Market Data
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Nexus between Transparency and Trading Nexus between Transparency and Trading
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Other Instruments Other Instruments
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Market Information and the Financial Crisis Market Information and the Financial Crisis
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Cite
Abstract
This chapter describes the regulation of market information. It begins with an overview of the market data that exchanges and other market centers publish, including transaction reports and last-sale data, quotations, and limit orders. It also discusses differences in the information published by various types of market center–e.g., order-driven, quote-driven, and hybrid trading systems, market makers, and dark pools. It then considers various policy arguments for regulation, including competition among market centers, the fragmentation and internalization of order flow, and the risk of adverse selection and market impact. The chapter ends with a discussion of the US and EU regulatory framework that governs the dissemination of market information with respect to equity securities (such as the US National Market System), debt securities, exchange-traded derivatives, and in the wake of the recent financial crisis, swaps and over-the-counter derivatives.
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