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Anonymity, Stealth Trading, and the Information Content of Broker Identity

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  • Alex Frino
  • David Johnstone
  • Hui Zheng

Abstract

This paper examines whether the identity of a broker involved in transactions contains information. Using a sample of transactions from the Australian Stock Exchange-where broker identity is transparent-we provide evidence that consecutive buyer-/seller-initiated transactions by the same broker have a relatively high permanent price impact. This implies that broker identity conveys information to market participants, and that markets in which broker identity is disclosed are likely to be more efficient. We also find that medium-sized trades by the same broker convey greater information than large and small trades, which is consistent with stealth trading by informed investors. Copyright (c) 2010, The Eastern Finance Association.

Suggested Citation

  • Alex Frino & David Johnstone & Hui Zheng, 2010. "Anonymity, Stealth Trading, and the Information Content of Broker Identity," The Financial Review, Eastern Finance Association, vol. 45(3), pages 501-522, August.
  • Handle: RePEc:bla:finrev:v:45:y:2010:i:3:p:501-522
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    Cited by:

    1. Aktas, Osman Ulas & Kryzanowski, Lawrence, 2014. "Market impacts of trades for stocks listed on the Borsa Istanbul," Emerging Markets Review, Elsevier, vol. 20(C), pages 152-175.
    2. Thu Phuong Pham, 2015. "Broker ID transparency and price impact of trades: evidence from the Korean Exchange," International Journal of Managerial Finance, Emerald Group Publishing, vol. 11(1), pages 117-131, February.
    3. Pham, Thu Phuong & Westerholm, P. Joakim, 2013. "A survey of research into broker identity and limit order book," Working Papers 17212, University of Tasmania, Tasmanian School of Business and Economics, revised 16 Oct 2013.
    4. Murphy Jun Jie Lee, 2013. "The Microstructure of Trading Processes on the Singapore Exchange," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 4.
    5. Dennis, Patrick J. & Sandås, Patrik, 2014. "Does Trading Anonymously Enhance Liquidity?," Working Paper Series 288, Sveriges Riksbank (Central Bank of Sweden).

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