In economics , a market is transparent if much is known by many about: What products and services or capital assets are available , market depth quantity available , what price , and where.
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. For example, if it makes sellers reluctant to give steep discounts to certain buyers e. There are two types of price transparency: The two types of price transparency have different implications for differential pricing. While the stock market is relatively transparent, hedge funds are notoriously secretive.
Researchers in this area have found concerns by hedge funds about the crowding out of their trades through transparency and undesirable effects of incomplete transparency. There is a rich literature in accounting that takes a critical perspective to market transparency, focusing on the nuances and boundaries. This also connects to the performativity of quantitative models  or "reacitivity. Dynamics of transparency may also differ between investment markets, cambist markets where goods trade without being used up,   and other types of markets, e.
In fair value accounting FVA , transparency may be complicated by the fact that level 2 and 3 assets cannot strictly be marked-to-market , given that no direct market exists, creating questions about what transparency means for these assets. Level 2 assets may be marked-to-model , a topic of interest in the social studies of finance ,   while Level 3 assets may require inputs including management expectations or assumptions.
There are few markets that require the level of privacy, honesty, and trust between its participants as the Forex FX market. With little to no transparency, trader's ability to verify transactions becomes virtually impossible, at least if one does not have faith that the market exchange is operating in a well-run fashion, a problem that is unlikely with the major brokerage services open to institutional investors e. Reuters, Bloomberg, and Telerate. In a situation with a problematic market exchange lacking transparency, there would be no trust between the client and the broker, yet surprisingly, there is nonetheless demand to trade in dark pools.
This has also become an area of financial innovation. Companies such as Fair Trading Technology  and their T3 Integration Bridge seek to allow traders to trade with transparency and the ability to verify that each trade makes it to the market. Forex markets are now also a target for new blockchain innovations, which would allow trading outside of centralized exchanges or change the way these exchanges operate. From Wikipedia, the free encyclopedia. This article is a special case of the topic at transparency humanities.
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