I had a lengthy debate with a senior TSX account manager as to why "anonymous" trading is allowed on the TSX.  It puts retail investors at a definite disadvantage...

The primary reason for anonymity is to reduce market impact costs when moving a large position.  There are a number of exchanges worldwide that allow anonymous trading:  ASX in 2005, Euronext Paris in 2001, Tokyo in 2003.

The TSX model allows participants to reap all the benefits of anonymity and full attribution.  Brokers prefer attribution when they decide to advertise to seek liquidity.  Forced anonymity would force them to call around the street with an intention of interest.  Brokers prefer anonymity when they do not want to reveal to the market that they are moving a large position.   By offering voluntary attribution TSX prevents order migration to other marketplaces that are either fully attributed or fully anonymous.  There is no evidence that anonymity causes manipulation in the Canadian markets.  A recent independent study of the Canadian stock markets (link attached) describes some of the reasons anonymity is used by brokers and the study concludes that anonymity creates tighter spreads for liquid symbols with no detrimental effect on spreads for illiquid symbols. Further, the study concludes there are no increased incidences of frontrunning in relation to anonymous trading.

The impact of pre-trade anonymity on ASX liquidity, 19 May 2006 by SIRCA?s Carole Comerton-Forde and Kar Mei Tang:

• Please Note: changes to levels of transparency on pg 6;
• Please Note: bid/ask spreads conclusions on pg 13

http://www.degroote.mcmaster.ca/faculty/pdf/InformationalContentofAnonymousOrdersinCanadianStockMarket%20-%20Aug1.06.pdf

 Attribution rules from the TSX:

 http://www.tsx.com/en/pdf/AttributionChoiceFAQ.pdf