Optimal Transparency in a Dealer Market with an Application to Foreign Exchange Richard K. Lyons Journal of Financial Intermediation , July 1996, 225-254. Namely, though greater transparency can accelerate revelation of information in price, it can also impede dealer risk management. Slower price adjustment provides time for nondealers to trade, thereby sharing risk otherwise borne by dealers. A Simultaneous Trade Model of the Foreign Exchange Hot Potato Richard K. Lyons Journal of International Economics , May 1997, 275-298. At the outset, risk-averse dealers receive customer orders that are not generally observable.
Dealers then trade among themselves.
Thus, each dealer intermediates both his customers' trades and any information contained therein. This information is subsequently revealed in price depending on the information in interdealer trades. We show that hot-potato trading reduces the information in interdealer trades, making price less informative. A Week of FX Dealing Richard K. Lyons Journal of International Money and Finance , February 1998, 97-115. This paper examines foreign exchange trading at the dealer level.