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Smoke and Mirrors? Significance of small share parcels

Discussion in 'Beginner's Lounge' started by barney, Oct 3, 2006.

  1. barney

    barney

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    Hi folks, Just wondering if anyone can enlighten me on the significance of literally dozens of very small share lots being bought/sold on a given stock during normal trading? Parcels of 224 shares one of the most common (approx. $4 sp) The trades appear to have no bearing on the stock movement (most are bought without "creating" a new price level)............any advice??
    Cheers, Barney :dunno:
     
  2. dj_420

    dj_420

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    Re: Smoke and Mirrors!? Significance of small share parcels

    some could be ammendments, ie out of 10 000 shares you sold 9 800 and have 200 remaining, then amend it to get rid of the 200 parcel that is left.

    only other guess is to create market sentiment, to give the impression that the stock is either been sold or bought and to create a selling buying opportunity.
     
  3. nioka

    nioka

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    Re: Smoke and Mirrors!? Significance of small share parcels

    This has happened to me twice today. Once where the order was filled in two parts and one where I increased the price on the balance not filled to fill the order.
     
  4. barney

    barney

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    Re: Smoke and Mirrors!? Significance of small share parcels

    Hi there DJ, I reckon you are right with the second idea..........must be the traders trying to make the stock appear to be getting hit constantly to bump up their sell price/entice buyers, when the stock is not moving enough ....................interesting to watch how they do it................subtle market manipulation...... Cheers, Barney
     
  5. cuttlefish

    cuttlefish

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    Re: Smoke and Mirrors!? Significance of small share parcels

    barney not sure which stock it is but some of the following are possible reasons for the small parcels:

    * you say its a $4 share price - 224 shares is small but you'd be surprised how many people have portfolio's consisting of small parcels of $1000 or so worth of stock - not everyone's a millionare.

    * the stock price was possibly not always $4 - if it was once $8 then that parcel was worth more and possibly a more normal sized parcel - that still doesn't explain the non-round number though.

    * For bluechips many people choose dividend reinvestment as an option. So they might start with 10000 shares in a stock then this might grow to 10224 or some equally odd number via dividend reinvestment. If they sell their whole parcel then a bidder for only 10,000 shares will leave an orphaned parcel of 224 - this then propogates (the next 10,000 buyer ends up with 224 plus 9776 of the next 20,000 seller, who subsequently has 10,224 remaining of their 20,000 sell order etc.).

    * There are also other ways that people end up with more shares in odd numbers such as bonus issues, converted bonus options etc.

    * there are also possibly people that buy odd sized parcels as part of their trading money management strategy. (e.g. If someone's tech analysis tells them to buy at $4 and set a stoploss at $3.88 and their max loss on a trade in their money management plan is $200 then they can buy 909 shares and still fit their money management criteria). (odd example but a possible reason).

    Often if you look at the past history of a stock you can sometimes find a reason for funny little parcels. For example I traded a small cap stock that would often have odd little parcels of 400 shares go through (at 10c per share - i.e. a $40 sized parcel!). I thought it was a bit suspect, but working back looking for a reason for this I realised that the stock was originally issued at 50c per share. 4000 shares would have been a $2000 parcel (not an unusual amount to be subscribed for in a float).

    Because the share price fell so much after the issue (it was a tech wreck stock), the shares then went through a 1 for 10 consolidation (so 4000 became 400) but the share price continued to fall, even after the consolidation, to 10c - thus explaining the odd small sized parcels that would appear from time to time (not surprisingly, often towards the end of the tax year).

    So its not always a conspiracy - more often than not there's probably some sensible explanation for why these odd sized parcels are going through.
     
  6. barney

    barney

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    Re: Smoke and Mirrors!? Significance of small share parcels


    Thanks for that :fish:, I'm probably being overly suspicious........but it adds to the mystery a bit :)

    Just for the record the stock was BOL (Volume for the day approx 320,000) ........Of about 350 trades for the day, approx 180 trades were under 300 shares...............with 63 of those trades being exactly 224 share parcels............interesting just the same. Cheers, Barney.
     
  7. trader

    trader

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    Re: Smoke and Mirrors!? Significance of small share parcels

    I have been told by asic that it is actualy a computer program that is doing
    the selling , eg someone selling 100,000 share over a certain time frame .
    Also sometime you can tell by the time apart between sells , one sell ever
    3 minutes for example .
     
  8. cuttlefish

    cuttlefish

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    Re: Smoke and Mirrors!? Significance of small share parcels

    Had a quick look through BOL - it could be related to their employee share purchase plan - employees were entitled to apply for shares - it was designed to let them utilise some $1000 tax free threshold to purchase shares - stamp duty and other fees would be deducted before allocation of the shares and they had some kind of loan scheme - the shares were held in a trust and escrowed for a period of time.

    But they've also issued various lots of shares in placements both to institutions and to shareholders as far as I can tell.

    Some of the placements were oversubscribed and were arbitrarily wound back to 60% of the amount applied for which can also result in odd amounts.

    In at least one of their appendix 3b's the amount of shares issued was evenly divisible by 224.
     
  9. cuttlefish

    cuttlefish

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    Re: Smoke and Mirrors!? Significance of small share parcels


    sounds like a sensible explanation as well - would explain the frequency of the small parcels being traded.
     
  10. barney

    barney

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    Re: Smoke and Mirrors!? Significance of small share parcels


    Thanks for that research C, (and Trader), And here am I thinking I was on to a conspiracy theory :D ............. It did have me a little confused as to why so many small parcels would be bought if the buyer/s were paying brokerage fees, but your explanation clears that up..........(Just for my own safety, I'll still hang on to a little bit of suspicion....I think that is healthy when dealing in the stock market :) Cheers, Barney
     
  11. spitrader1

    spitrader1

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    Re: Smoke and Mirrors!? Significance of small share parcels

    guys unfortunately you are all wrong.....its a banks arb traders machine....they trade the sread between the SPI and the cash market and when they decide the spread is right and they want to trade they hit the market for literally 100's of different shares for small parcels at the same time getting set in the futures markets....one of the post was also slightly correct as well, sometimes it could be what is called a VWAP engine, a program designed to achieve vwap on small insto orders.
     
  12. barney

    barney

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    Re: Smoke and Mirrors!? Significance of small share parcels


    Thanks for that ST1, So would that mean that they consider the share undervalued if they are buying, and overvalued if they are selling?...... Also bearing in mind that 100's of these parcels have gone through over the past few days, a very large cross trade order (XT) of over 400,000 shares went through in one trade late friday arv................does this indicate anything in particular, or could it simply be an insto closing their position for the weekend?? Thanks Barney.
     
  13. spitrader1

    spitrader1

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    Re: Smoke and Mirrors!? Significance of small share parcels

    barney, it has nothing to do with under or overvalued, it just means the spread between the cash market and the futures market has moved where they want to take a position, they can do it either way also, ie, be short the cash long the future, or long the cash short the future (as my wife just pointed out being long cash is easier because you dont have to have borrow in place if you wish to short the cash market)
     
  14. spitrader1

    spitrader1

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    Re: Smoke and Mirrors!? Significance of small share parcels

    the 400T crossing could be so many things its not really worth speculating...
     
  15. barney

    barney

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    Re: Smoke and Mirrors!? Significance of small share parcels

    Cheers for the info ST1

    Wouldnt mind having a bit of "long" cash myself :)
     
  16. Seneca60BC

    Seneca60BC

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    Re: Smoke and Mirrors!? Significance of small share parcels

    Hi Guys

    These small parcels are shares being bought by a computer system for a buyer - eg I have noticed ever since the company I am holding announced a buy back, I have been seeing small parcels of shares being bought at market.

    Hope this enlightens some.

    Regards
     
  17. NeoT1

    NeoT1

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    Re: Smoke and Mirrors!? Significance of small share parcels

    X means that the order is split into two parcles and the second has the X, the other thing is that orders can be transacted off line as an 'Off Market' order this is generally where an individual wants to transfer shares to another entity ie; from X to Wife or Husband or Trust account or Company, most insto's do this as they transfer massive parcles that dont hit the volume until after market close or the next day, so therefore even intraday volume can be subjective - If there is an off market transfer they pay only 'Capital Gains' for the transaction, no brokerage in most cases, this can be done through most full service brokerage firms.

    If you look close enough at your computer screen you will see the individual pixels, if you look to closely at the market you can by sheer accident miss the overall direction of the market, and be gobbled up in intraday frenzie - unless you have 3 - 8 screens with all sorts of info on them this is not worth the time or effort.

    Reward v/s Time
     
  18. Basilisk

    Basilisk

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    Re: Smoke and Mirrors!? Significance of small share parcels

    Here's the answer I got back from the ASX a few weeks back when I saw the same thing happening with IRE.

    The large number of small trades is most likely an example of algorithm
    order. A common example of an algorithm order is an order that try's to
    achieve the volume weighted average price over the course of the day.
    The algorithm will split one large order up into a number of small
    parcels and then send each small parcel to the market at an appropriate
    time in an attempt to get the average price. There are various types of
    algorithm orders which in general result in a greater number of small
    value trades. Another example of algorithm trading is index arbitrage.
    This involves buying a portfolio of shares that replicates the index and
    simultaneously selling a number of futures contract against this
    portfolio. Often index arbitrage results in small quanties of shares
    traded and especially in unusually parcels. This is because each stock
    has a separate weighting in the index and an index arbitrageur will
    execute fixed dollar "baskets" of trades.

    Algorithm trading is something we are aware of and have seen an increase
    in algorithm trading over the past year. We expect that with an
    anonymous market and the proposed changes to trading fees that it will
    continue to become more popular as has been the case in overseas
    markets.
     
  19. Seneca60BC

    Seneca60BC

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    Re: Smoke and Mirrors!? Significance of small share parcels

    thanks bas - good explanation from the ASX!
     
  20. Kauri

    Kauri E/W Learner

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    Re: Smoke and Mirrors!? Significance of small share parcels

    This logarithmic trading must be a hard way to earn a living...
    e.g today in IGO, in fact for a few days now, lots of 19 and 20 shares being traded regularly.

    In the clip below...
    @ 11.32 bid 5.04 ask 5.08 buy 19 @ 5.08
    @ 11.56 bid 5.05 ask 5.07 sell 19 @ 5.05
    @ 12.08 bid 5.05 ask 5.09 buy 19 @ 5.09
    @ 12.21 bid 5.05 ask 5.09 buy 19 @ 5.09
    @ 12.43 bid 5.08 ask 5.09 sell 19 @ 5.08

    :confused:
     

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