Is full post-trade transparency a good thing?

It is debatable whether a market should be fully post-trade transparent, or allow for omissions and/or deferrals in the publication of transaction data – and, if so, to which extent.

On the one hand, it can be argued that full post-trade transparency is essential to:

• Price discovery, and therefore transaction data publication should not be omitted or deferred. Indeed, the way investors value/price a security is not independent of its past prices, which can be considered to be data as important as p.e. financial information about the issuer – a financial market, as any other market, is a social venue in which participants influence each other’s perceptions and actions;
• Promote a level playing field in trading, as the parties involved in a unpublished transaction have an information advantage when compared to other investors (and by the way, such can arguably be considered inside information).

On the other hand, it can be argued that reduced post-trade transparency is essential to:

• Liquidity for block trading – indeed, a liquidity provider (LP) may not be willing to be the counterparty for a block trade if the details of such transaction are to be immediately made public, since other market participants could then infer that there is an LP with a large position to be hedged and thus could trade ahead of it;
• Countering excessive volatility, since the publication of block trades can arguably spark a set of emotional/excessive trading reactions.

MIFID2/MIFIR

The MIFID2/MIFIR regulatory package seems to have been designed having all this in mind, as it requires post-trade transparency for a wide range of instruments, while allowing for transaction publication deferrals in the case of large trades.