PSE to implement broker anonymity

The Philippine Stock Exchange (PSE) is set to implement broker anonymity starting next year, March 2015. The move is to align with similar practices in most markets overseas and to reap the benefits of this system.

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. It also prevents “herding” mentality as the identity of brokers who post and match orders is withheld which usually translates into tighter spreads. 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.

The PSE shall implement a two-phase transition to broker anonymity to help traders and investors with the adjustment. The first phase which will take effect 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 added.

Japan, Korea, Malaysia, Singapore and Thailand are among the Asian markets that have adopted broker anonymity in the last 15 years.