Does Trading Anonymously Enhance Liquidity?

Patrick J. Dennis () and Patrik Sandås ()
Additional contact information
Patrick J. Dennis: McIntire School of Commerce, University of Virginia, Postal: Charlottesville, VA, 22904
Patrik Sandås: McIntire School of Commerce, University of Virginia, Postal: Charlottesville, VA, 22904

No 288, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: Anonymous trading is the norm in today's financial markets but there are a few exceptions. We study one such case, the OMX Nordic Exchanges (Stockholm, Helsinki, Copenhagen, and Reykjavik) that have traditionally been more transparent than most other markets. On June 2, 2008 OMX Nordic switched to making post-trade reporting anonymous for some of their markets. We exploit this quasinatural experiment to investigate the impact this change had on liquidity and trading behavior. Our difference-in-difference method reveals a modest, though statistically insignificant, 14 basis point improvement in the quoted spread under the post-trade anonymous regime. The price impact of a trade decreased by a statistically significant four basis points for seller-initiated trades and did not change for buyer-initiated trades.

Keywords: Anonymity; Transparency; Liquidity; Broker ID (search for similar items in EconPapers)
JEL-codes: G10 G14 G15 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2014-10-01
New Economics Papers: this item is included in nep-cfn and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.riksbank.se/Documents/Rapporter/Working ... rap_wp288_141015.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:rbnkwp:0288

Access Statistics for this paper

More papers in Working Paper Series from Sveriges Riksbank (Central Bank of Sweden) Sveriges Riksbank, SE-103 37 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Lena Löfgren ().