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Does Trading Anonymously Enhance Liquidity?

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  • Dennis, Patrick J.
  • Sandås, Patrik

Abstract

Is liquidity better when a trade counterparty’s brokerage firm is unknown (anonymous) or known (transparent)? We examine a quasinatural experiment where some firms switched from transparent to anonymous trading and then, 1 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.

Suggested Citation

  • Dennis, Patrick J. & Sandås, Patrik, 2020. "Does Trading Anonymously Enhance Liquidity?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 55(7), pages 2372-2396, November.
    • Handle: RePEc:cup:jfinqa:v:55:y:2020:i:7:p:2372-2396_10
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    References listed on IDEAS

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