Nice example about how lack of information leads to volatility in markets. If you are looking for prescriptions to fix our financial markets, increasing transparency of trading would do wonders to eliminate speculation and refocus investors on value.
I'm not sure what precisely you mean by "transparency of trading". One of the common goals of trading is minimize the revelation of information about your intentions that other traders can exploit against you. Trading is like warfare--being transparent is not a strength.
Additionally, you can't just make one law that tells people to "be transparent." The enacted laws have to be specific in order to be meaningful. Because they are specific, people will find ways around them and continue playing the game.
Trading of securities is a regulated market. The rules about what information is available to the market are a combination of tradition and regulation. But they are man-made and arbitrary. I argue that the current fashions in regulation starve the markets of information and contribute to crises.
I'll give you just one example. Large traders attempt to conceal their identity. This leads to a lot of gamesmanship, as you point out. If this information were released with every order placed then I would argue a lot of volume would dry up and volatility would decrease.
