The word transparency can mean different things to different people. In the corporate finance world, people use the term to refer to the degree to which a firm's accounting choices help investors understand the valuation of items on the firm's balance sheet. In the banking world, transparency often refers to the banker's knowledge of credit characteristics associated with a loan customer or a trade counterparty. In the world of futures and securities markets, the word transparency refers to the degree to which financial exchanges publicly disseminate real-time information on transaction prices, quotations, order flow, and other market variables. It is this case that is addressed here.

A completely transparent market would be one where all relevant market information is instantly and freely available to all potential ...