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Anonymous Trading in Equities

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  • TOM GRIMSTVEDT MELING

Abstract

In this paper, I explore a reform at the Oslo Stock Exchange to assess the causal effect of posttrade trader anonymity on stock liquidity and trading volume. Using a regression discontinuity approach, I find that anonymity leads to a reduction in bid‐ask spreads of 40% and an increase in trading volume of more than 50%. The increase in trading volume is accounted for largely by increased trading activity by institutional investors, while retail investors do not adjust their trading behavior in response to anonymity. The results suggest that posttrade anonymity positively affects standard measures of market quality.

Suggested Citation

  • Tom Grimstvedt Meling, 2021. "Anonymous Trading in Equities," Journal of Finance, American Finance Association, vol. 76(2), pages 707-754, April.
    • Handle: RePEc:bla:jfinan:v:76:y:2021:i:2:p:707-754
    DOI: 10.1111/jofi.12988
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    2. Sjur Didrik Flåm, 2024. "Via Order Markets Towards Price-Taking Equilibrium," Journal of Optimization Theory and Applications, Springer, vol. 201(3), pages 977-994, June.
    3. Wang, Kai & Li, Tingting & San, Ziyao & Gao, Hao, 2023. "How does corporate ESG performance affect stock liquidity? Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    4. Sean Foley & Tom G Meling & Bernt Arne Ødegaard, 2023. "Tick Size Wars: The Market Quality Effects of Pricing Grid Competition," Review of Finance, European Finance Association, vol. 27(2), pages 659-692.
    5. Yang, Ann Shawing, 2023. "Regret sensitivity and stock certificate loss reporting: Evidence from Taiwan," Finance Research Letters, Elsevier, vol. 58(PA).

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