You posted:
"The 1000 share blocks are the ones you want to watch. Those tend to be the SOES traders, but you have to have real time tick by tick quotes to see the action. Large blocks tend to be pre arranged trades that don't have any affect on the market. They can also be option related, or MMs moving inventory around."
A few important corrections:
1. Successive lots of 1000 shares are actually more likely to be selectnet executions than soes traders hitting or taking a stock. This is because in a rapidly-moving stock, market makers are being preferenced via selectnet by each other very quickly and usually for MORE than 1000 shares, but often are only willing to meet their 1000 share obligation until the action slows; in addition, soes is limited by mandated intervals...selectnet is not, and dealers realize the need to respond immediately to selectnet orders, if only for the 1000 share obligation.
2. You stated that large blocks tend to be pre-arranged trades that don't have any effect on the market. Nothing could be further from the truth. Saavy traders realize that even in a fast-moving name, large prints often signal intraday reversals. In a name that is moving up, large prints should be interpreted as completed block buys by a customer working through a dealer; often, the buying pressure will ease immediately after the print, and the dealers, knowing that the customer with the big appetite is done, will go short on all the day traders who pile in after they see a few big prints. The converse is true on stocks that are falling fast; big prints near the bottom often mean a dealer is completing a customer's large sell order, after which the dealer is often more willing to go long the stock.
3. You also stated that large blocks can be dealers moving inventory around. I've seen this thesis put forth on many other threads and it's a fallacy. Dealers almost NEVER trade large blocks among themselves; there's no money in that. Market maker activity is primarily CUSTOMER oriented, since money is made from volume and order flow. Intra-dealer activity is basically a necessary but relatively minor sideshow, conducted via selectnet for small lots. This is exactly what puts the daytrader at a distinct disadvantage. Looking at a Level II screen is like looking at a jungle canopy from an airplane...all the important action is hidden from view, known only to those swinging in the trees. |
