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In October 2000, the Securities and Exchange Commission (SEC) passed Regulation Fair Disclosure (FD) in an effort to reduce selective disclosure of material information by firms to analysts and other investment professionals. We find that the information asymmetry reflected in trading costs at earnings announcements has declined after Regulation FD, with the decrease more pronounced for smaller and less liquid stocks. Return volatility around mandatory announcements is also lower but overall information flow is unchanged when mandatory and voluntary announcements are combined. Thus, the SEC appears to have diminished the advantage of informed investors, without increasing volatility.

A global trend towards automated trading systems raises the important question of whether execution costs are, in fact, lower than on trading f loors. This paper compares the trade execution costs of similar stocks in an automated trading structure~Paris Bourse! and a f loor-based trading structure~NYSE!. Results indicate that execution costs are higher in Paris than in New York after controlling for differences in adverse selection, relative tick size, and economic attributes across samples. These results suggest that the present form of the automated trading system may not be able to fully replicate the benefits of human intermediation on a trading f loor.A TRADING MECHANISM IS DEF INED by the distinctive set of rules that govern the trading process. The rules dictate when and how orders can be submitted, who may see or handle the orders, how orders are processed, and how prices are set~see O'Hara~1995!!. The rules of trading affect the profitability of various trading strategies~see Harris~1997!!, and hence affect trader behavior, price formation, and trading costs. A fundamental question in securities market design is the link between the rules of the trading mechanism and the cost of trade execution. Numerous studies have investigated this issue by comparing bid-ask spreads in the auction-based New York Stock Exchange~NYSE! and the dealer-based Nasdaq. 1 While much of the debate centers on the relative merits of auction and dealer markets, an alternative