Abstract: Stock market transparency is one of the important aspects in trading design because it determines the realization of price discovery function in capital market. On December 8, 2003, the number of disclosed publicly prices in limit order is increased from three to five in Shenzhen Stock Exchange, which means the stock market transparency increases. Based on the information content model, the information contents of limit order book and its change are studied, and the increased transparency’s impact on price discovery efficiency is analyzed. The results show that the two new prices have margin information content, which is helpful for investors to make decisions. Also, the pricing error of transaction price deviates from efficient price and the return autocorrelation decreases significantly, so the price is more efficient. All in all, the increased transparency improves price discovery efficiency, enhances the price discovery function realization, and improves the market quality. Some good suggestions are also given for the reform of trading designs in the future.

Key words: stock market transparency, information content, price discovery efficiency