Voluntary pre-trade anonymity and market liquidity Articles uri icon

publication date

  • June 2020

issue

  • 2

volume

  • 50

International Standard Serial Number (ISSN)

  • 0210-2412

Electronic International Standard Serial Number (EISSN)

  • 2332-0753

abstract

  • This paper analyses the effects on liquidity of voluntary pre-trade anonymity in the trading process. We confirm previous studies showing that market liquidity improves immediately after anonymous trading. Using the daily percentage of effective volume traded anonymously, we show that the anonymity&#-liquidity relationship presents a non-linear U-shape. We focus on the voluntary concealment of broker identification introduced by the Spanish Stock Exchange in October 2015. We conclude that, in our sample, anonymity increases stock liquidity but at a decreasing rate; when a considerable part of the effective volume is traded anonymously, additional percentages of anonymous trading deteriorates stock liquidity

subjects

  • Business
  • Economics

keywords

  • voluntary trader anonymity; market liquidity; pre-trade transparency; information disclosure; market quality