Broker anonymity rule starts early next year

MANILA, Philippines - The operator of the country’s stock market will implement broker anonymity in trades by early next year.

The move, which is in line with global best practices, will result in improved liquidity and prevent the herding mentality among brokers, the Philippine Stock Exchange (PSE) said in a statement yesterday.

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

“Many markets have moved to this regime in order to attract more participants in the market and improve liquidity,” the PSE said. Japan, Korea, Malaysia, Singapore and Thailand are among the Asian markets that have adopted broker anonymity in the last 15 years.

“It also prevents herding mentality as the identity of brokers who post and match orders is withheld which usually translates into tighter spreads,” PSE said, adding that based on previous studies, markets that switched to an anonymous broker environment have shown reduced bid-ask spreads.

So far, broker identifiers are not displayed pre-trade or when orders are still being queued. However, once orders are matched, the broker identifiers 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 worldclass standards,” said PSE president and CEO Hans B. Sicat.

Given the interest the local bourse is enjoying, it is the right time the PSE implements rules to attract more foreign investors and make them comfortable in investing locally, Sicat said.

Specifically, the PSE will implement a two-phase transition to broker anonymity to help traders and investors with the adjustment.