Transparency (market)

In economics, a market is transparent if much is known by many about:

• What products, services or capital assets are available.
• What price.
• Where.

There are two types of price transparency: 1) I know what price will be charged to me, and 2) I know what price will be charged to you. The two types of price transparency have different implications for differential pricing.^[1]

This is a special case of the topic at transparency (humanities).

A high degree of market transparency can result in disintermediation due to the buyer's increased knowledge of supply pricing.

Transparency is important since it is one of the theoretical conditions required for a free market to be efficient.

Price transparency can, however, lead to higher prices, if it makes sellers reluctant to give steep discounts to certain buyers, or if it facilitates collusion.

While the stock market is relatively transparent, hedge funds are notoriously secretive. Some financial professionals, including Wall Street veteran Jeremy Frommer are pioneering the application of transparency to hedge funds by broadcasting live from trading desks and posting detailed portfolios online.

Transparency in the Forex market

There are few markets that require the level of privacy, honesty, and trust between its participants as the FX market.^[2] This creates great obstacles for traders, investors, and institutions to overcome as there is a lack of transparency. With little to no transparency trader’s ability to verify transactions becomes virtually impossible. Without transparency there is no trust between the client and the broker. Companies such as Fair Trading Technology ^[3] and their T3 Integration Bridge allows traders to trade with transparency and the ability to verify that each trade makes it to the market.

The company uses the bridge to connect traders to the world's largest ECN, Dukascopy Bank SA,^[4] by using MetaTrader 4 platform.

See also

• Shell corporation
• Underground economy
• Information
• Efficient market
• Transfer pricing
• Market anomaly
• International Sugar Organization
• Consumer protection
• Consumer organization
• Competition regulator
• Extractive Industries Transparency Initiative (or EITI)
• Transparency (behavior)

References

1. ↑ Would Greater Transparency and Uniformity of Health Care Prices Benefit Poor Patients?, Margaret K. Kyle and David B. Ridley. Health Affairs. 2007. Vol. 26, No. 5: 1384-1391.
2. ↑ Forex Glossary
3. ↑ http://www.fairtradingtech.com/t3-bridge/transparency/
4. ↑ http://www.dukascopy.com/