Nothing darkens a crisis like the disappearance of a market. Routine transactions that barely merit a second thought become impossible and business relationships, normally taken for granted, disappear. [1]
Paper by William L. Silber
Abstract:
The suspension of trading on the New York Stock Exchange for more than four months following the outbreak of World War I fostered a substitute market on New Street as a source of liquidity. The New Street market suffered from a lack of price transparency because its transactions were not disseminated on the NYSE ticker and its quotations were blacklisted at the leading newspapers. This paper shows that despite the impaired information flow and the somewhat wider bid-ask spreads compared with the New York Stock Exchange, New Street offered economically meaningful liquidity services. The absence of price transparency turned an individual stock’s reputation for liquidity into an important variable in explaining the structure of bid-ask spreads on New Street.
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[1] When Washington Shut Down Wall Street: The Great Financial Crisis of 1914 and the Origins of America’s Monetary Supremacy by William L. Silber