Does Broker Anonymity Hide Informed Traders?

This study investigates whether broker anonymity impairs the ability of the market to detect informed trading in the lead up to takeover announcements. Our research represents the first study in this area to analyse the effects of broker anonymity in the context of significant information asymmetry. Results indicate that informed traders are less detected, and therefore better off when broker identifiers are concealed. This finding has important policy implications for exchange officials deciding whether or not to reveal broker identifiers surrounding trades, especially considering that almost all prior research suggests that broker anonymity is correlated with improved liquidity.