We examine the consequences of transparency in an experimental
multiple-dealer market with asymmetrically informed dealers. Five
professional securities traders make a market for a single security.
In each trading round, one of the dealers (the "insider") is told the
security's true value. We vary both pre-trade and post-trade
transparency by changing the way quote and trade information is
published. The insider's profits are greatest when price efficiency is
lowest. Price efficiency, in turn, is reduced by pre-trade
transparency and increased by posttrade transparency. Market
liquidity, measured by dealers' bid-ask spreads, is improved by
pre-trade transparency and reduced by post-trade transparency
