Preventing Information Leakage

62 Pages Posted: 10 Apr 2019 Last revised: 23 Sep 2019

See all articles by Jonathan Brogaard

Jonathan Brogaard

University of Utah - David Eccles School of Business

Dan Li

The University of Hong Kong - School of Economics and Finance

Matthew Ma

Southern Illinois University at Carbondale

Ryan Riordan

Queen's University - Smith School of Business

Date Written: March 15, 2019

Abstract

We study the use of multiple brokers by institutions to help mitigate broker information leakage. We document that trades using multiple brokers are larger and more profitable than trades using a single broker, consistent with using multiple brokers being driven by information motives. When conditioning on trade size, we find that trades using multiple brokers have lower price impacts, larger long-term trade profitability, and fewer follower trades than similar single broker trades. The results suggest that some traders execute their best trades using multiple brokers to avoid broker information leakage.

Keywords: brokers, informed trades, trading profits, information leakage

JEL Classification: G14, G18

Suggested Citation

Brogaard, Jonathan and Li, Dan and Ma, Matthew and Riordan, Ryan, Preventing Information Leakage (March 15, 2019). Available at SSRN: https://ssrn.com/abstract=3353501 or http://dx.doi.org/10.2139/ssrn.3353501

Jonathan Brogaard (Contact Author)

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

HOME PAGE: http://www.jonathanbrogaard.com

Dan Li

The University of Hong Kong - School of Economics and Finance ( email )

Shenzhen
China

Matthew Ma

Southern Illinois University at Carbondale ( email )

Rehn Hall - Mail Code 4626
Carbondale, IL Illinois 62901-4515
United States

Ryan Riordan

Queen's University - Smith School of Business ( email )

Smith School of Business, Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

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