# Crossed Trades (XT)



## markor (24 September 2004)

Hi,

I was looking at the course of sales for the day for MUL.AX and I saw a few XTs. On the ASX it appears to be a legal procedure: http://www.asx.com.au/markets/l4/OrderTypes_AM4.shtm

whereas elsewhere it is not: http://www.investorsedge.com/dictionary/Crossed_trade.html

Can someone explain why?

Cheers,

Markor


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## stefan (24 September 2004)

In Australia, a crossed trade is legal only if it's executed at the current bid/sell level and only if there is a genuine market available. Which means, there has to be a bid/sell offer at the price the broker want's to do the crossing. If this isn't the case, then he can create this situation. Either way, the important thing is that it does happen at the current "Real" market value. 

In the US it is illegal because they define it slightly different by assuming that a broker can do a trade without having to register it. In theory your broker could sell you shares another one of his clients wants to sell. He could do that at a price that isn't really reflecting the current market by lying to both parties and cashing in on the gap. This practice is also illegal in Australia so it all comes down to the definition.

Anyway, this leads to the conclusion that in fact a crossed trade on the ASX is a normal trade (in US terms) except for the fact that the buyer and seller is the same broker (but not the same client). 

Ah, it's confusing, isn't it. Maybe somebody else has a better explaination. I'm off for the weekend.

Have a nice weeked

Stefan


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## Mofra (29 September 2004)

Stefan,

My understanding of crossed trades was as per your explanation with the proviso that the cross trades themselves must go through at the previous market price ie if last trade was at $5, the cross trade must go through at that price. Crossed trades at at higher or lower than this amount were treated as a form of market manipulation and as such were illegal. After market trades are treated differently. I'm sure someone will come post the pucka definition sooner or later though.   HTH


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## stefan (30 September 2004)

> My understanding of crossed trades was as per your explanation with the proviso that the cross trades themselves must go through at the previous market price ie if last trade was at $5, the cross trade must go through at that price.



I can' tell for sure, but from what's on the ASX website, I'd say it doesn't have to be at the previous market price:


			
				ASX said:
			
		

> ...ensuring a crossing market exists, that is the bid/offer spread must be 1 price step, for at least 10 seconds. If a crossing market does not exist the Trading Participant must create one by entering orders such that the market is one price step apart;




Happy trading

Stefan


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