Transparent markets struggle against less transparent competitors, but some dealers persist.
Transparent markets can survive competition from less transparent ones. Low-transparency dealers gain an advantage by capturing early order flow, allowing them to offer better prices and make more profit. A study confirmed this by testing a game-theoretic model and conducting experiments. However, as more dealers choose low transparency, their advantage decreases, while transparent dealers benefit from informed traders. This leads to a small number of transparent dealers persisting in the markets.