Interesting explanation on block trades: A friend of mine provided
this interesting post from somewhere in thw web:
<< ...This might sound like a dumb question but here goes anyway--when its
listed that a block trade went through, how do you know whether it was a buy
or a sell?ÿ There was a 700,000 block that went through at 4:15 for
SYQT--seeing as I hold this stock I would like to know which way?? ...ÿ >.
Well, I hate to say any question is a dumb question, but....I am continually
amazed at the amount of time spent on message boards (especially on SI) trying
to discern whether a trade was a buy or a sale.ÿ
News Flash: it is always both.ÿ Duh.ÿ I mean, how can you possibly have a
trade without a buyer and a seller?
So, the relevant question is, was the stock traded down (at the bid) or up (on
the offer)?ÿ And even then it may tell you nothing.ÿ
For instance, suppose I am a MM for GCSO.ÿ A client of the firm wants to buy
100,000 INTC.ÿ How do we get him filled?ÿ First we try to cross the stock in
house, with another client, and print both sides of the trade and keep all the
spread.ÿ Failing that we try to buy it on the bid on Instinet, or actually
"get in the box" on Nasdaq so that we are the best bid on the Nasdaq system
(you will see GSCO as top bid on Level II).ÿ Or we do a combination of
all three, most likely.ÿ Once we have aquired 100,000 shares at say, 78 3/4,
all on the bid side, guess what?ÿ We print it to the client at 78 7/8, or
wherever the current best Nasdaq offer is (still perfectly legal with a market
order). We will likely charge him no commission, as we made the spread. (It
actually gets more involved than this if two institutional sales traders are
involved:ÿ both want a teenie).
So, do we put all those drips and drabs of stock we bought on the tape as we
acquired the 100M?ÿ If they were all at different prices, yes.ÿ Otherwise we
could batch them as one blockÿÿ And then we print the 100M sale to the client
as one block.ÿ As it's printed at the ask you assume it's a "buy".
But what if in the example I gave above GSCO was buying the 100M shares for
its own account?ÿ You would see all those prints at the bid and assume someone
was obviously selling a lot of stock.ÿ That is true, but you miss the point -
that GSCO is a huge buyer.ÿ He's just too smart to pay the offer side.
So tape watching is sort of pointless, IMO - you will never know what agenda
underlies those prints you see.ÿ What is more important is watching the
dynamics of offering and bidding -THAT is how one judges order flow and thus
supply and demand.ÿ If a size piece comes in for sale, is it taken
immediately?ÿ (It's going to go up.) Is stock being offered at the bid? (It's
going to go down.)
As for the SYQT trade, it was obviously a cross.ÿ My time and dales shows 700M
print @ 3 3/32 @ 15:43 and then 700M print up a 32nd @ 3 1/8 @ 15:44.ÿ So the
MM made the firm $21,875 on that trade.ÿ Not bad for a minutes work.ÿ ;)ÿ Just
kidding, they probably worked it all day.ÿÿ OK - back to my weekend. |
