The local bourse has begun the initial steps for the implementation of a system for broker anonymity, where the stock trading engine will not show the broker making a transaction.
Targeted for implementation in March 2015, the move aligns the practices in the local bourses with the practices in most markets overseas. In a statement, the Philippine Stock Exchange (PSE) cited that many markets have moved to this regime in order to attract more participants in the market and improve liquidity.
“The PSE shall implement a two-phase transition to broker anonymity to help traders and investors with the adjustment,” the local bourse said.
The first phase, which will take effect in March 2014, will limit the visibility of broker identification of matched trades only to brokers and their systems, while the second phase will start in March 2015 and will make all broker identifiers anonymous to all market participants. This move, according to PSE, will prevent the “herding” mentality, as the identity of brokers who post and match orders is withheld, which usually translates into tighter spreads.
At present, the identities of brokers are not displayed pre-trade or when orders are still being queued. But once orders are matched, the identities 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 Hans Sicat, PSE president and chief executive officer.
“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,” he added.
The Japanese, Korean, Malaysian, Singaporean and Thai bourses are among the Asian markets that have adopted broker anonymity in the last 15 years.