Intra-Day Revelation of Counterparty Identity in the World's Best-Lit Market

Abstract

We study the impact of post-trade disclosure of broker IDs on market efficiency, trading volume and bid-ask spreads in a unique South Korean experiment. We find that simply revealing the ex-post order flow of the major brokers to the entire market improves market efficiency to the level of a random walk and increases trade volume by facilitating the rapid removal of asymmetric information. The least volatile and largest stocks experience a remarkable 59% rise in volume during the afternoon session. Realized spreads fall, indicating greater competition between liquidity suppliers, whereas market impact increases because of more rapid price discovery.