Transparency in financial markets refers to the amount of on-going market data the marketplaces provide to investors connected to securities' pricing and movements. Complaints of lack of transparency on U.S. capital markets have been leveled at the bond market and in particular at so-called "dark pools" of securities-trading groups.
The basic level of market pre-trade transparency allows investors and traders to track a security's updated bids and offers and latest market price to avoid the large spreads that usually harm investors. Intraday traders take pre-trade transparency a step further, preferring to view electronic order books showing the last five bid and offer prices of securities. Both also require post-trade transparency through full disclosure of transaction fees and other expenses by exchanges and investment intermediaries.
The Securities and Exchange Commission has addressed these issues in the U.S bond market, noting numerous complaints from investors about unusually large bid-offer spreads, particularly in the municipal bond market, and high transaction fees. In January 2006, then-SEC Chief Economist Chester S. Spatt told the American Finance Association that, despite bond-dealer fears, research showed that increasing market transparency tightens future spreads in bond markets.
Some traders have complained that the increasingly popular virtual private trading arenas known as dark pools, where large institutional investors can quickly shift large blocks of securities without unduly spooking the market, are starting to cloud market transparency. Researchers claim that up to 10 percent of all NYSE and NASDAQ trades occur in dark pools, where trading is done 'in the dark' and commission-free, removing that much pricing information from the remaining trades performed on exchanges that charge commission.
Transparency and the Financial Crisis of 2008
In July 2010, President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, in hopes of avoiding a repeat of the 2008 financial crisis. Among the goals of Dodd-Frank is increased transparency of financial markets. Provisions to enhance transparency include regulation of the $400 trillion swaps market, systemic risk oversight, and registration requirements for hedge funds and other private funds. 
In Europe, several regulations address transparency of swaps markets in response to the continent's sovereign debt crisis of 2010-11. In regulations on credit default swaps, OTC derivatives, and short-selling, the European Commission hoped to enhance transparency and allow regulators to monitor developing risks.
- Market transparency. Wikipedia.
- Discussion: An Overview of Bond Market Transparency. SEC.
- Analysis: Dark Pools Mudding Up Market Transparency. Fox Business News.
- Senate Passes Finance Bill. The Wall Street Journal.
- New framework to increase transparency and ensure coordination for short selling and Credit Default Swaps. Europa.