Does Trading Anonymously Enhance Liquidity?

53 Pages Posted: 1 Nov 2014 Last revised: 16 May 2019

See all articles by Patrick J. Dennis

Patrick J. Dennis

University of Virginia - McIntire School of Commerce

Patrik Sandås

University of Virginia

Multiple version iconThere are 2 versions of this paper

Date Written: May 13, 2019

Abstract

Is liquidity better when a trade counterparty's brokerage firm is unknown (anonymous) or known (transparent)? We examine a quasi-natural experiment where some firms switched from transparent to anonymous trading and then, one year later, switched back. Our results for inside spread, price impact, and limit order book depth suggest that liquidity improves when anonymous post-trade reporting is introduced and liquidity worsens when anonymous post-trade reporting is reversed.

Keywords: Anonymity, Transparency, Post-trade reporting, Liquidity, Broker ID

Suggested Citation

Dennis, Patrick J. and Sandas, Patrik, Does Trading Anonymously Enhance Liquidity? (May 13, 2019). Available at SSRN: https://ssrn.com/abstract=2516933 or http://dx.doi.org/10.2139/ssrn.2516933

Patrick J. Dennis

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States
804-924-4050 (Phone)

Patrik Sandas (Contact Author)

University of Virginia ( email )

McIntire School of Commerce
Charlottesville, VA 22904
United States
1-434-243-2289 (Phone)

HOME PAGE: http://www.comm.virginia.edu/faculty_research/staff_directory/sandas.html

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