PSE to implement broker anonymity


Posted at Jan 28 2014 10:05 AM | Updated as of Jan 28 2014 06:05 PM

A trader works on a computer at the Philippine Stock Exchange in Makati City. Photo by Romeo Ranoco, Reuters

MANILA, Philippines - The Philippine Stock Exchange (PSE) said it will start implementing broker anonymity in March 2015.

Broker anonymity refers to the practice of not showing the broker identifiers for trading matched at the trading engine.

In a statement, the PSE said the move will be aligned with similar practices in most markets abroad. Among the Asian markets that have adopted broker anonymity in the last 15 years are Japan, Korea, Malaysia, Singapore and Thailand.

Markets overseas have adopted broker anonymity to attract more participants, as well as improve liquidity. The practice is aimed at preventing the "herd" mentality as the identity of brokers who post and match orders is withheld which usually translates into tighter spreads.

The PSE said studies suggest that markets that switched to an anonymous broker environment have shown reduced bid-ask spreads.

At present, broker IDs are not displayed pre-trade or when orders are still being queued. But once orders are matched, the broker IDs of the executing brokers become visible.

“Trading anonymously is just one of the many best practices that the PSE will be adopting to realize its vision of being a stock exchange with world class standards. And with all the interest that the Philippine market is getting, it is high time that we have guidelines in place to attract more foreign investors and make them comfortable in investing in our market,” said PSE President and CEO Hans B. Sicat.

A two-phase transition to broker anonymity will be implemented. The first phase, which will start in March 2014, will limit the visibility of brokers IDs of matched trades only to brokers and their systems. The second phase will start on March 2015 and will make all broker identifiers anonymous to all market participants.

“We hope that our market participants and investors will see the medium to long term advantages of adopting broker anonymity. The transition period is aimed at helping market players adjust to the practice before we move to the full implementation of broker anonymity in 2015,” Sicat said.