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- Title
Why Do Traders Choose to Trade Anonymously?
- Authors
Comerton-Forde, Carole; Putniņš, Tālis J.; Tang, Kar Mei
- Abstract
This paper examines the use, determinants, and impact of anonymous orders in a market where disclosure of broker identity in the trading screen is voluntary. We find that most trading occurs nonanonymously, contrary to prior literature that suggests liquidity gravitates to anonymous markets. By strategically using anonymity when it is beneficial, traders reduce their execution costs. Traders select anonymity based on various factors including order source, order size and aggressiveness, time of day, liquidity, and expected execution costs. Finally, we report how anonymous orders affect market quality and discuss implications for market design.
- Subjects
ANONYMITY; LIQUIDITY (Economics); FINANCIAL disclosure; SECURITIES trading; STOCKBROKERS; FINANCIAL research; FINANCE
- Publication
Journal of Financial & Quantitative Analysis, 2011, Vol 46, Issue 4, p1025
- ISSN
0022-1090
- Publication type
Article
- DOI
10.1017/S0022109011000214