Abstract
The paper analyzes strategic behavior of dealers under different post-trade transparency regimes. It constructs a game-theoretic model in which dealers interact on a regular basis and face uncertainty about the size of the uninformed demand. We argue that higher post-trade transparency of the order flow might result in wider spreads and higher profits for the dealers. The reason is that public and timely dissemination of information on all past trades gives the dealers a highly informative commonly observed signal about the size of the uninformed demand. As a result, dealers can fine tune their spreads based on this signal and earn high expected profits.
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