Why do traders choose to trade anonymously?
- Publication Type:
- Journal Article
- Citation:
- Journal of Financial and Quantitative Analysis, 2011, 46 (4), pp. 1025 - 1049
- Issue Date:
- 2011-08
Closed Access
Filename | Description | Size | |||
---|---|---|---|---|---|
![]() | 2011002685OK.pdf | 236.11 kB |
Copyright Clearance Process
- Recently Added
- In Progress
- Closed Access
This item is closed access and not available.
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. © Copyright Michael G. Foster School of Business, University of Washington 2011.
Please use this identifier to cite or link to this item: