Connecting Disconnected Financial Markets?

In most financial markets, securities are traded in isolation. Such a disconnected market design can be inefficient if agents trade more than one security. I assess the welfare effects of connecting markets by allowing orders for one security to depend on the prices of other securities. I show that everyone trades identical amounts under both market structures if and only if the clearing prices are perfectly correlated or all are price-takers. Prices in disconnected markets might allow strategic traders to extract higher rents from non-strategic traders. In expectation, connected markets generate higher welfare, but all markets become efficient as they grow large.