Transparency and Financial Markets: The Case of Anonymity on Euronext Paris

In market microstructure, the link between transparency and market quality is ambiguous. While we may intuitively believe that higher transparency should be associated with better liquidity and market efficiency, results from theoretical, empirical and experimental literature sketch a more complex story. On April 21, 2001, Euronext Paris stopped displaying the identities of market members who place orders in the limit order book. This natural experiment provides a good opportunity to better understand how one particular aspect of transparency -- anonymity -- can affect investors' behavior and market quality in an order-driven environment