RE:RE:RE:RE:Fidelity KEY TAKEAWAYS
- Anonymous trading may be important to large traders who don't want to provide clues to other traders that they are buying or selling.
- No regulated order is truly anonymous since the trades still need to be settled and cleared, and regulators still need access to trade information if they want it.
- Retail traders don't need to concern themselves with trading anonymously since they typically don't have a significant price impact and other traders aren't particularly concerned with smaller one-time orders.
Understanding Anonymous Trading
Anonymous trading is primarily used to avoid tipping off the market of a pending action, which could lead to front-running behavior or jockeying for the best position in an order book.
For instance, a large institutional buyer that's interested in acquiring millions of shares may not want to make their intentions known before they can complete the purchase. The risk is that smaller investors could bid up the price hoping to sell it to the institutional buyer for a quick arbitrage profit, or pennying could be used to unfairly gain execution priority.