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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.

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
    DOI: 10.1111/j.1540-6288.2010.00258.x
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    Cited by:

    1. 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 Limited, vol. 11(1), pages 117-131, February.
    2. Chen, Tao, 2019. "Trade-size clustering and price efficiency," Japan and the World Economy, Elsevier, vol. 49(C), pages 195-203.
    3. Doan, Bao & Vo, Duc Hong, 2021. "Is there any information content of traded stocks in an emerging market? Evidence from Vietnam," International Economics, Elsevier, vol. 167(C), pages 78-87.
    4. Hatheway, Frank & Kwan, Amy & Zheng, Hui, 2017. "An Empirical Analysis of Market Segmentation on U.S. Equity Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 52(6), pages 2399-2427, December.
    5. Cebiroglu, Gökhan & Hautsch, Nikolaus & Walsh, Christopher, 2019. "Revisiting the stealth trading hypothesis: Does time-varying liquidity explain the size-effect?," CFS Working Paper Series 625, Center for Financial Studies (CFS).
    6. Attig, Najah & El Ghoul, Sadok, 2021. "Flying under the radar: The real effects of anonymous trading," Journal of Corporate Finance, Elsevier, vol. 71(C).
    7. Alex Frino & Andrew Lepone & Grace Lepone, 2019. "Price Impact of Corporate Bond Trading: Evidence from the Australian Securities Exchange," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 22(03), pages 1-22, September.
    8. 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.
    9. Jagjeev Dosanjh, 2017. "Exchange Initiatives and Market Efficiency: Evidence from the Australian Securities Exchange," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 1-2017, January-A.
    10. 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, July-Dece.
    11. repec:uts:finphd:34 is not listed on IDEAS
    12. Dennis, Patrick J. & Sandås, Patrik, 2014. "Does Trading Anonymously Enhance Liquidity?," Working Paper Series 288, Sveriges Riksbank (Central Bank of Sweden).
    13. 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.
    14. 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.

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