Trade Transparency Research Articles

Comparison of the Level of Implementation of the IOSCO Principle “Regulation Should Promote Transparency of Trading” in the European Union and Colombia

This article assesses and compares the level of implementation of the IOSCO principle concerning trading transparency in the regulatory framework of the European Union and Colombia. For that purpose, the author applies the methodology set by IOSCO, so as to assess the level of implementation of the referred principle in the regulatory framework of the mentioned jurisdictions. Nonetheless, the scope of the research is narrow to the study of the level of trading transparency of the transactions executed in the stock exchange.

Mismanagement and poor transparency in the European processed seafood supply revealed by DNA metabarcoding

In the global processed seafood industry, disparate actors play different roles along the supply chain, creating multiple opportunities for mistakes, malpractice, and fraud. As a consequence, consumers may be exposed to non-authentic products, which hinder informed purchasing decisions and broader efforts to improve trade transparency and sustainability. Here, we characterised the taxonomic composition of 62 processed seafood products in Italian, British and Albanian retailers, purposefully obtained from different supply routes, using multiple DNA metabarcoding markers. By combining molecular results with metadata reported on labels, we revealed patterns of mislabelling in 24 products (39%) across sampling regions, denoting lack of transparency of processed seafood products based on resources sourced from either Europe or globally. We show that the accuracy of label claims and the mis-represented and underestimated levels of traded biodiversity are largely determined by the management of raw material by global processors. Our study shows that DNA metabarcoding is a powerful and novel authentication tool that is mature for application at different stages of the seafood supply chain to protect consumers and improve the sustainable management of fish stocks.

The role of institutional quality, renewable energy development and trade openness in green finance: Empirical evidence from South Asian countries

By considering the significant role economic growth has played in environmental function between 1990 and 2019, this paper examines the relationships between renewable energy development, trade openness, and institutional quality in the development of green finance in South Asian countries. The effectiveness of institutions and trade transparency are factors in green finance. We use a panel data model to ascertain the cointegration among the variables. The study employs the OLS fixed pool method along with a quantile regression to assess the model and reveal that, although growth in renewable energy development and trade openness worsen the ecological environment, institutional quality and the use of renewable energy promotes green finance development. The findings indicate that trade openness and institutional quality have a positive link with green financing. Institutional quality drives the use of renewable energy, whereas gross domestic product (GDP) drives the environmental impact. In light of these findings, policymakers can put in place beneficial policies for renewable energy development as an economic instrument to minimize ecological footprints and enhance green finance development.

A Study on the Criteria for Investment in the Bond Market

This paper uses relevant information to illustrate some of the factors that influence investors' choice of bonds: by analyzing a cross-section of firms to conclude that insurance companies with stronger regulatory capital constraints tend to seek higher yields; according to the findings of a study into the added value of inflation-linked bonds in a portfolio, inflation-linked bonds widen the mean-variance efficient frontier for investors holding nominal bonds and stocks by simulating credit spreads that are more like those actually seen in the market and modeling leverage as a mean-reversion; and the findings indicate that market liquidity is neutrally or favorably impacted by portfolio trading transparency. This was established by using a controlled experiment to investigate the impact of transparency on the liquidity of the BBB bond market. In addition, some suggestions are put forward for some related investors, and the future research direction is also proposed at the end of the article.

Over-the-counter market and corporate bond market development

The objective of this paper was to empirically investigate the factors of corporate bond market development for a sample of emerging and developed countries over the period 2008-2017. Here, we used both fixed effect and Prais-Winsten methods to study the determinants of corporate bond market development. We document a negative and significant relationship between primary market issuance and the over-the-counter (OTC) secondary corporate bond market that can be explained by the inefficiency of the OTC corporate bond market and the lack of trade transparency for this trading venue. We suggest that these microstructure elements of the OTC secondary market harm the corporate bond market development and thus discourage corporate bonds issuance. Furthermore, we provide strong evidence of the relationship between economic growth, domestic credits, corruption and the issuance of the domestic corporate bond market.

Comparative Analysis of Foreign Regulatory Legislation of OTC Derivatives

The problems associated with existing regulatory initiatives that are meant to eliminate opaque market and with the clearing of over-the-counter derivative instruments. Comprehensively examination of the key similarities and differences between US and EU approaches to regulating the OTC derivatives market. For the study, we used the methods of logical analysis, theoretical generalization and systematization. The main difference between these approaches is the restrictions on commercial banking trade with the separation of derivative trading operations, with the rules of ownership and the establishment of mandatory requirements for exchange trade by central counterparties, as well as with commercial banking. The main similarity is the obligatory clearing of standardized contracts, the scope of derivatives, clearing for consumers and reporting on cleared and uncleaned derivative transactions by almost all financial counterparties. Cross-border clearing is facilitated by two approaches used in the US and the EU, where the legal culture differs from each other. Summing up, we can note that the greatest flexibility in dealing with unforeseen consequences for the regulator is provided by the US approach. At this stage, we have considered an institutional description of the differences and similarities between these approaches to regulating OTC derivatives in order to ensure trade transparency and greater stability.

Oreos Versus Orangutans: The Need for Sustainability Transformations and Nonhierarchical Polycentric Governance in the Global Palm Oil Industry

While the myriad benefits of palm oil as a food, makeup, and cleaning product additive drive its demand, globally, the palm oil industry remains largely unsustainable and unregulated. The negative externalities of palm oil production are diverse and devastating to tropical ecosystem integrity and human livelihoods in palm oil nations. Given the current trend in increasing sustainability and transparency in global supply chains, we suggest that sustainability policy reforms are feasible and have the potential to promote 21st century U.S. and international sustainability standards. Polycentric governance may improve the attainment of sustainable global palm oil standards with a set of rules that interact across linear and nonlinear hierarchies and structures, thereby improving collaboration efforts, and increasing connectivity and learning across scales and cultures. Transformations towards sustainability in international palm oil governance has the potential to make valuable contributions to global sustainable development and improve the prosperity of poor rural communities in the tropics by providing a framework for achieving palm oil trade transparency and aligning the sustainability goals across a range of actors.

Lighting Up the Dark: Liquidity in the German Corporate Bond Market

We study the impact of transparency on liquidity in OTC markets. We do so by providing an analysis of liquidity in a corporate bond market without trade transparency (Germany), and comparing our findings to a market with full post-trade disclosure (the U.S.). We employ a unique regulatory dataset of transactions of German financial institutions from 2008 until 2014 to find that: First, overall trading activity is much lower in the German market than in the U.S. Second, similar to the U.S., the determinants of German corporate bond liquidity are in line with search theories of OTC markets. Third, surprisingly, frequently traded German bonds have transaction costs that are 39-61 bp lower than a matched sample of bonds in the U.S. Our results support the notion that, while market liquidity is generally higher in transparent markets, a sub-set of bonds could be more liquid in more opaque markets because of investors crowding their demand into a small number of more actively traded securities.

Trade Transparency and Management Earnings Forecasts

Trade Transparency and Management Earnings Forecasts

Sandalwood trade and development in Papua New Guinea

ABSTRACT The harvest and trade of sandalwood (Santalum macgregorii) from natural stands began in Papua New Guinea (PNG) in the late nineteenth century. Sporadic harvesting has occurred intermittently since then and continues to this day, with little active management to promote regeneration. This study was undertaken to determine the state of natural sandalwood resources in PNG, clarify the associated regulations for monitoring its trade and export, and identify practical options for local resource restoration through family and clan plantings. We studied export permit data, interviewed resource owners and traders, evaluated forestry legislation and regulation and engaged landowners in three areas of the country to establish sandalwood plantings. We found few regulations or monitoring protocols for sandalwood harvesting and trade in PNG. Export declarations are the only means for reporting the grades and volumes traded. There is evidence that both grades and prices have been underdeclared at point of export. No export permits in the last eight years contained records of any high-grade (A) products, and declared export values were lower than domestic prices paid to resource owners. Export records since 1997 reveal that significant volumes of up to 126 tonnes annually were traded in the early 2000s. The natural resource is yet to fully recover, with much lower volumes exported. To address the reduction in availability of natural sandalwood, we engaged landowners in three locations to establish sandalwood plantings. The results demonstrate that sandalwood, grown in agroforestry systems, can be productive in PNG, with mean basal stem diameter increments of up to 2.0 cm y−1 recorded. To further develop the sandalwood sector in PNG, we make four recommendations: (1) establish a ten-year moratorium on the sandalwood trade to enable the recovery of natural populations; (2) develop a product grading and sales registry system to improve trade transparency and monitoring; (3) reallocate the tax revenues generated from sandalwood exports to the PNG Forest Authority to fund the monitoring of harvesting and trade; and (4) promote options for resource restoration through family garden, boundary and enrichment plantings. The sandalwood industry in PNG has the potential to be viable and sustainable if the proposed recommendations are adopted by appropriate stakeholders to manage production and regulate the trade in the country and internationally.

Research on the risk of block chain technology in Internet finance supported by wireless network

In this paper, a cascaded depth learning framework is constructed. A cascaded depth model is successfully implemented by studying and analyzing the specific feature transformation, feature selection, and classifier algorithm used in the framework. A feature combination method based on enhanced feature selection and classification is proposed according to the different features learned by each layer of the model. Combining block chain cryptography technology, distributed technology, consensus accounting mechanism of technology innovation, transaction data encapsulation into specific format data unit, encapsulated into a linear list in chronological order, using encryption algorithm trading transparency, traceability of data, security, credibility, and uniqueness in financial data analysis. The experimental results show that with the increase of the number of model layers, our method can significantly improve the classification accuracy. This result also verifies that the proposed model can learn more effective data representation features and also verifies the effectiveness of the proposed feature combination method.

On Brazilian Insider Trading: Determinants and Informational Effects

We investigate the determinants of insider trading and its effects on the levels of stock price informativeness in Brazil. We use corporate insider trading data for companies included in the IBrX-100 index between December 2016 and June 2018. In our standard sample, our findings indicate that insiders tend to trade in high liquidity months, and this behavior hampers the detection of adverse selection. Also, insider trading seems to be irrelevant to efficiency. Our study indicates that greater trading transparency is essential for outsiders to increase market efficiency since trading alone does not provide such a scenario. We suggest caution in the use of low-frequency liquidity measures for adverse selection detection in this market.

Market Drivers and Discovering Technologies in Meat Species Identification

Changing demographics and the need to know what we eat has fueled a drastic rise in consumer awareness and hence the demand for certification by government and regulatory bodies. The inceptions of regulations in emerging economies like India and China that have entered the global food trade are expected to increase the demand for testing services. Due to the sheer volume of the global meat market, there has been focus on technologies for meat speciation, like immunoassay-based techniques and electrophoretic techniques. However, by virtue of their intrinsic constraints, these technologies have been superseded by the recent molecular DNA-based methods. DNA-based technologies, mainly polymerase chain reaction (PCR) and real-time PCR (RTPCR), are in the spotlight because of their quantitative capabilities, better sensitivity, and rapidity. Next-generation sequencing (NGS), a high-throughput sequencing method, has revolutionized meat speciation studies in terms of speed, read length, and throughput, along with cost-reduction. Variants of chromatographic and spectroscopic techniques are an attractive option due to the speed of analysis and minimal sample preparation but they fail to quantify adulteration in cases such as cooked meat, which has more complex chromatographic patterns. Even with the advent of these methods, consumers need to be vigorously assured that players across the supply network are operating in the consumer’s interest and not in their own financial gain. Under the Blockchain system of technology, traceability of the end product is feasible at every point of its processing or packaging and all the data can be retrieved in less than 2 min. Considering the intersection of the largest target segment, meat, and the fastest growing technology, PCR-based technology, this review intends to provide an updated overview, of market and research studies for authenticity, and a short summary of traceability systems to enhance trade transparency.

The impact of post-trade transparency on price efficiency and price discovery

PurposeThe purpose of this paper is to examine the impact of post-trade transparency on price efficiency and price discovery.Design/methodology/approachThe authors use an exogeneous change in market transparency in the Taiwan Stock Exchange that mandates the disclosure of unexecuted orders of the five best bid and ask prices after each trade, and conduct an event study analysis.FindingsAfter the change, price efficiency enhances for both large and small firms, although the impact on stock prices is greater when the firm is larger. The authors also find that post-change trading reveals more private information for large firms but more public information for small firms. The findings support the view that transparency has a positive impact on market quality.Originality/valueThe paper adds to a large body of literature investigating the relationship between transparency and market behavior, especially the ongoing debate about whether trading transparency positively affects price dynamics. The findings also have important policy implications for the regulators.

The Effects of the RCS’s Application in the Value Added Tax Collecting Process on the Perception of SME Taxpayer in Korea’s Trade Activity: Transparency and Fairness in Trade

Value Added Tax (VAT) is the largest source of global tax revenue. However, it faces issues of tax avoidance, such as the black-market and missing trader intra-community fraud. Many studies have postulated that the introduction of the Reverse Charge System (RCS) will contribute to the enhancement of transparency and fairness in trade for small and medium enterprises (SMEs) that supply goods or provide services. This study analyzes SME taxpayers’ perception of transparency and fairness in trade resulting from the introduction of the RCS into the South Korean VAT system. In B2B transactions that handle gold, copper, and steel scrap, large companies often abuse their bargaining power over smaller firms by not paying VAT with their purchase or reducing the prices to equal VAT, leading to low trade transparency. When it comes to gold, copper and steel scrap trading, the imbalance in bargaining power results in one of the parties being unable to reap maximum benefits because of unfairness. SMEs with relatively weak bargaining power suffer from unfair trading practices such as price cutting and the imposition of VAT by their counterparts. Since the introduction of the RCS, however, SME taxpayers appear to believe that trade fairness has improved. This study’s findings reveal that SMEs are more likely to perceive improvement in trade transparency and fairness since the implementation of the RCS, indicating that the RCS has exerted a positive influence on SMEs. This study provides important policy implications for countries that intend to implement the RCS by offering empirical evidence of its benefits.

Lighting up the Dark: Liquidity in the German Corporate Bond Market

We study the impact of transparency on liquidity in OTC markets. We do so by providing an analysis of liquidity in a corporate bond market without trade transparency (Germany), and comparing our findings to a market with full post-trade disclosure (the U.S.). We employ a unique regulatory dataset of transactions of German financial institutions from 2008 until 2014 to find that: First, overall trading activity is much lower in the German market than in the U.S. Second, similar to the U.S., the determinants of German corporate bond liquidity are in line with search theories of OTC markets. Third, surprisingly, frequently traded German bonds have transaction costs that are 39-61 bp lower than a matched sample of bonds in the U.S. Our results support the notion that, while market liquidity is generally higher in transparent markets, a sub-set of bonds could be more liquid in more opaque markets because of investors crowding their demand into a small number of more actively traded securities.

The Demand for Central Clearing: To Clear or Not to Clear, That Is the Question

This paper analyses whether the post-crisis regulatory reforms developed by globalstandard-setting bodies have created appropriate incentives for different types of market participants to centrally clear Over-The-Counter (OTC) derivative contracts. Beyond documenting the observed facts, we analyse four main drivers for the decision to clear: 1) the liquidity and riskiness of the reference entity; 2) the credit risk of the counterparty; 3) the clearing member’s portfolio net exposure with the Central Counterparty Clearing House (CCP) and 4) post trade transparency. We use confidential European trade repository data on single-name Sovereign Credit Derivative Swap (CDS) transactions, and show that for all the transactions reported in 2016 on Italian, German and French Sovereign CDS 48% were centrally cleared, 42% were not cleared despite being eligible for central clearing, while 9% of the contracts were not clearable because they did not satisfy certain CCP clearing criteria. However, there is a large difference between CCP clearing members that clear about 53% of their transactions and non-clearing members, even those that are subject to counterparty risk capital requirements, that almost never clear their trades. Moreover, we find that diverse factors explain clearing members’ decision to clear different CDS contracts: for Italian CDS, counterparty credit risk exposures matter most for the decision to clear, while for French and German CDS, margin costs are the most important factor for the decision. Moreover, clearing members use clearing to reduce their exposures to the CCP and largely clear contracts when at least one of the traders has a high counterparty credit risk.

Financial Disclosure and Market Transparency with Costly Information Processing*

We study a model where some investors (“hedgers”) are bad at information processing, while others (“speculators”) have superior information-processing ability and trade purely to exploit it. The disclosure of financial information induces a trade externality: if speculators refrain from trading, hedgers do the same, depressing the asset price. Market transparency reinforces this mechanism, by making speculators’ trades more visible to hedgers. Hence, issuers will oppose both the disclosure of fundamentals and trading transparency. Issuers may either under- or over-provide information compared to the socially efficient level if speculators have more bargaining power than hedgers, while they never under-provide it otherwise. When hedgers have low financial literacy, forbidding their access to the market may be socially efficient.

Subscribing to transparency

The paper empirically explores how more trade transparency affects market liquidity. The analysis takes advantage of a unique setting in which the Shanghai Stock Exchange offered more trade transparency to market participants subscribing to a new software package. First, the results show that the additional data disclosure increased trading activity, but also increased transactions costs through wider bid–ask spreads. Thus, in contrast to popular policy belief, the paper finds that more transparency need not improve market liquidity. Second, the paper finds a particularly strong immediate liquidity impact accompanied by altered trading behavior, which suggests a significant impact on institutional traders subscribing relatively early. Lastly, since the effective level of market transparency is bound to depend on how many traders are subscribing to the data, the study can empirically establish the functional form between market-wide transparency and liquidity. The relationship is non-monotonic, which can explain the lack of consensus in the existing literature where each empirical study is naturally confined to specific parts of the transparency domain.

L'obbligo dei contratti di cessione dei prodotti agricoli e alimentari: una valutazione degli effetti dell'articolo 62 della legge n. 27/2012

In recent years, European farmers have been facing two new phenomena: agricultural commodity price volatility and a decrease in agricultural added value. These issues led the High Level Forum to censure low transparency in relationships between firms and frequently unfair commercial practices, after the European Commission had recognized that the agri-food supply chains were functioning imperfectly. Economic theory considers contracts as a means of coordinating entrepreneurs’ decisions (e.g. in terms of time, quantity, prices and product quality). Nevertheless, in the presence of oligopsony, buyers use contracts to improve and exercise their market power, for example by imposing vertical restraints. This situation is typical of European food supply chains, where highly concentrated sectors (food industry and retail) use their bargaining power against agriculture. In this context, antitrust authorities and eu Member States have sought to resolve the situation by stipulating appropriate competition policy measures. In Italy, Law 27/2012 has recently introduced new mandatory rules regarding sales contracts for agriculture and food products, in order to increase trading transparency and reduce payment times. Using an embedded multiple-case study, carried out through interviews and direct observations, this article analyses the initial effects of the application of the law on the Italian agri-food system.