The Effects of Spot Transparency on Bid-Ask Spreads and Volume of Traded Share Options.

It has been argued that the lack of transparency on the London Stock Exchange, caused by the practice of delaying publication of large trades, has adverse consequences for the market in traded share options on LIFFE. This hypothesis is investigated in two ways. First, the structure of equity options quotes is studied to see whether delayed publication widens the bid-ask spread. Second, regression analysis using daily and 30-minute data is applied to quantify the effects of non-transparent equity trades on the options market.