Mandatory Disclosure in Oligopolistic Market Making
Fuente:
arXiv
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| Autori principali: | , |
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| Natura: | Preprint |
| Pubblicazione: |
2026
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| _version_ | 1866911585277050880 |
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| author | Kim, Seongjin Choi, Jin Hyuk |
| author_facet | Kim, Seongjin Choi, Jin Hyuk |
| contents | We develop a multi-period Kyle-type model that incorporates both mandatory disclosure of informed trades and imperfect competition among market makers. We prove the existence and uniqueness of a linear equilibrium and show that the liquidity-enhancing effect of disclosure is fundamentally linked to the degree of market-making competition. Disclosure lowers trading costs by reducing price impact, and its marginal benefit is strictly larger when competition is weak. We empirically validate this prediction using the 2002 Sarbanes-Oxley Act disclosure reform as a natural experiment. A difference-in-differences analysis of U.S. equities confirms that the spread reduction following enhanced disclosure is significantly larger for stocks with fewer active market makers. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2604_10194 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | Mandatory Disclosure in Oligopolistic Market Making Kim, Seongjin Choi, Jin Hyuk Trading and Market Microstructure Mathematical Finance We develop a multi-period Kyle-type model that incorporates both mandatory disclosure of informed trades and imperfect competition among market makers. We prove the existence and uniqueness of a linear equilibrium and show that the liquidity-enhancing effect of disclosure is fundamentally linked to the degree of market-making competition. Disclosure lowers trading costs by reducing price impact, and its marginal benefit is strictly larger when competition is weak. We empirically validate this prediction using the 2002 Sarbanes-Oxley Act disclosure reform as a natural experiment. A difference-in-differences analysis of U.S. equities confirms that the spread reduction following enhanced disclosure is significantly larger for stocks with fewer active market makers. |
| title | Mandatory Disclosure in Oligopolistic Market Making |
| topic | Trading and Market Microstructure Mathematical Finance |
| url | https://arxiv.org/abs/2604.10194 |