Brokers don masks of anonymity
By Kevin Andrusiak
BROKERS will go anonymous with their trading from today, with those behind buy and sell orders to be masked by the Australian Stock Exchange.
As part of plans by the ASX to improve liquidity in the mid-cap sector, the move has divided opinion in the broking world, with the big institutions applauding the move the most.
Big broking firms, which account for up to 80 per cent of daily trade, are believed to have pressed hardest for the changes.
Institution codes will be removed from all orders, allowing brokers and their clients to anonymously put in buy and sell orders without fear of drawing attention to themselves.
Previously, brokers were able to see who was behind buying or selling of a stock via the code on their SEATS dealing screen.
Trading strategies were therefore easily flagged and the codes were crucial in takeovers and corporate power plays. Technically, it also gave clients access to who was behind big trades and presented opportunities for others to tailgate those trying to build or reduce share holdings.
The ASX hopes broker anonymity will open up the risky mid-cap sector which can be subject to big fluctuations in price on heavy trade.
ASX management were unavailable for comment yesterday.
Some private firms have flagged intentions of stepping up to fill the information void.
While broker anonymity has gained popularity internationally, big exchanges including the technology-laden Nasdaq composite in the US and the Hong Kong Stock Exchange still continue to identify brokers.
"If footprints are (likely to be) all over a trade, it is more than likely to be done off-market," said UBS head of sales trading John Garrett, explaining that until now an acquisitive company would build a stake in its target off-market to be sure of its anonymity. With the new rules, that will no longer be necessary.
"Most clients are supportive of it. I expect it will be a plus for the market and create a level playing field," he said.
Westpac director of sales and service Russell Karlson said: "Our hope is that it will increase liquidity and bring a level playing field to the market.
"I think it will stop predatory behaviour.
"A downside is it could be a logistical nightmare because before, brokers were able to call each other if there was an error; now they will have to go to the ASX to find out who to contact."
Broker identities will also be blacked out on options trading, but the identity of brokers behind warrant trades will be made available.
The ASX, as market operator and regulator, will still be able to identify the firms and brokers executing trades.
The move will be reviewed after 12 months.