Publication: Voluntary pre-trade anonymity and market liquidity
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Publication date
2020-06-16
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Tutors
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Publisher
Taylor&Francis
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.
Description
Keywords
Voluntary trader anonymity, Market liquidity, Pre-trade transparency, Information disclosure, Market quality
Bibliographic citation
MartÃnez, M. A., & Tapia, M. (2020). Voluntary pre-trade anonymity and market liquidity. Spanish Journal of Finance and Accounting / Revista Española de Financiación y Contabilidad, 50 (2), pp. 143-161.