Into the Dark: A study of the 2014, 2019, and 2020 post-trade anonymity reforms at Nasdaq Nordic and their impact on metrics of market quality

Sammanfattning: We test the impact of three post-trade anonymity regimes implemented by Nasdaq Nordic in 2014, 2019, and 2020. Using a sample of Mid Cap and Large Cap stocks listed in Stockholm, Copenhagen, and Helsinki, we examine the effect of different anonymity setups on standard measures of market quality through a difference-in-differences approach. Contrary to recent literature, we are unable to establish a market-wide relationship between post-trade anonymity and improved liquidity. In aggregate, daily relative bid-ask spreads do not tighten following the introduction of anonymity, nor does daily turnover increase. Post-trade anonymity does, however, improve bid-ask spreads by about six percent for the very largest stocks, which are characterised by lower information asymmetry as well as higher international and high-frequency trading activity. Our discussion suggests that the information content of broker codes, and thus the effect of post-trade anonymity, has been diluted by technological advancements and recent market reforms at Nasdaq Nordic.