Review of Quantitative Finance and Accounting

, Volume 34, Issue 2, pp 145–177

Dancing in the dark: post-trade anonymity, liquidity and informed trading

Original Research

DOI: 10.1007/s11156-010-0165-4

Cite this article as:
Hachmeister, A. & Schiereck, D. Rev Quant Finan Acc (2010) 34: 145. doi:10.1007/s11156-010-0165-4


We analyze the impact of post-trade anonymity on liquidity and informed trading in an order driven stock market. The German stock market introduced the Central Counterparty (CCP) in March 2003 for German equities traded on its anonymous electronic trading platform Xetra leading to a major change in its existing transparency regime. Before the introduction trader IDs were revealed to the counterparties of a trade, with the introduction of the CCP even after the transaction the traders remain anonymous. Previous theoretical and empirical research documents that pre-trade anonymity results in increased liquidity, while results on post-trade anonymity are mixed. We find a significant increase in liquidity measured through a reduction of 25% in implicit transaction costs. We also document that the arrival rate of informed traders is reduced in the anonymous setting. Following recent findings of Bloomfield et al. (J Finan Econ 75:165–199, 2005) that informed traders take on the role of liquidity providers we interpret our findings as indication that informed traders change their behavior in providing liquidity more aggressively in an anonymous environment.


Anonymity Liquidity Information based trading 

JEL Classification


Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  1. 1.Deutsche Börse AGFrankfurtGermany
  2. 2.Department of Business AdministrationTech University DarmstadtDarmstadtGermany