Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
960919 | Journal of Financial Markets | 2009 | 31 Pages |
Abstract
We examine the effects of the removal of broker identifiers from the central limit order book of the Australian Stock Exchange. We find that spreads and order aggressiveness decline, and order book depth increases, with the introduction of anonymous trading. This is consistent with the hypothesis that limit order traders are more willing to expose their orders when they can do so anonymously. Anonymous markets attract order flow from non-anonymous substitute markets, but this effect is only seen in large stocks. Our results suggest that exchanges operating in fragmented markets should consider anonymous trading to improve price competition and liquidity, although some of these benefits may be significant only if the stocks are sufficiently large and liquid.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Carole Comerton-Forde, Kar Mei Tang,