Normal
Todays useless bit of info.“It is not uncommon to see a single share, or a very small number of shares traded – that is, 1, 2, 3, etc shares in the order flow.Many years ago, brokers (or other evil institutions), were signalling each other, presumably about future price moves. Check out some of the seedier parts of the interweb and you’ll probably find some even more interesting theories.In today’s environment there are two main reasons why a single share, or a very small number of trades occur.Firstly, single share trades can occur because a single order has been split up over multiple price points. For example, someone might want to purchase 100 shares of the stock and when they place their order at market, there at 99 shares available at the first available price, e.g. 45.5c, and then the remainder of the order – 1 share – is filled at the next available price of 46c. Simple.Secondly, and more commonly, single share trades are a product of brokers that use algorithmic trading engines (algos) to trade large parcels of shares over a single, or even multiple, trading sessions. Imagine you are a broker and a client comes to you wanting to sell 10,000 units of a low liquidity stock. If you go and dump that order in the market, you will smash the price. Your order will keep slipping down further and further to the ever-lower available prices. That is where the term ‘slippage’ comes from. Worse still, you will be signalling to the market what you are doing.To avoid all of this, an algo will break up the order into many smaller parts – often as little as a single share – to avoid detection. It will then trade those smaller parcels over the session(s) either when demand is available, at different price points, or in time increments – e.g. maybe every five minutes.This is why sometimes you will see buy and sell orders of the same amount in the order flow – i.e. you might see parcels of a random number of shares – 317 for example – up and down one side of the order book, at multiple price points. This is a tell-tale sign of a larger order being broken up.Aside from not wanting to smash the price and get a ‘bad fill’ for a client, some brokers/institutions also run algos that hunt for patterns in the market and try to take advantage of these broken-up orders.Think of it as if you have a person/broker on one side wanting to sell a large chunk of shares and other people/market participants on the other side trying to capitalise on that movement. Now inject computers and the ability to recognise patterns and make decisions in a split second to take advantage of such price movements.The fight isn’t amongst people anymore, it’s amongst corporations with the fastest computing power, closest access to the exchanges, the best data scientists, mathematicians and string theorists. And if you think I am making this stuff up, I’m not. Read Michael Lewis’ Flash Boys and Gregory Zuckerman’s The Man Who Solved the Market”…
Todays useless bit of info.
“It is not uncommon to see a single share, or a very small number of shares traded – that is, 1, 2, 3, etc shares in the order flow.Many years ago, brokers (or other evil institutions), were signalling each other, presumably about future price moves. Check out some of the seedier parts of the interweb and you’ll probably find some even more interesting theories.In today’s environment there are two main reasons why a single share, or a very small number of trades occur.Firstly, single share trades can occur because a single order has been split up over multiple price points. For example, someone might want to purchase 100 shares of the stock and when they place their order at market, there at 99 shares available at the first available price, e.g. 45.5c, and then the remainder of the order – 1 share – is filled at the next available price of 46c. Simple.Secondly, and more commonly, single share trades are a product of brokers that use algorithmic trading engines (algos) to trade large parcels of shares over a single, or even multiple, trading sessions. Imagine you are a broker and a client comes to you wanting to sell 10,000 units of a low liquidity stock. If you go and dump that order in the market, you will smash the price. Your order will keep slipping down further and further to the ever-lower available prices. That is where the term ‘slippage’ comes from. Worse still, you will be signalling to the market what you are doing.To avoid all of this, an algo will break up the order into many smaller parts – often as little as a single share – to avoid detection. It will then trade those smaller parcels over the session(s) either when demand is available, at different price points, or in time increments – e.g. maybe every five minutes.This is why sometimes you will see buy and sell orders of the same amount in the order flow – i.e. you might see parcels of a random number of shares – 317 for example – up and down one side of the order book, at multiple price points. This is a tell-tale sign of a larger order being broken up.Aside from not wanting to smash the price and get a ‘bad fill’ for a client, some brokers/institutions also run algos that hunt for patterns in the market and try to take advantage of these broken-up orders.Think of it as if you have a person/broker on one side wanting to sell a large chunk of shares and other people/market participants on the other side trying to capitalise on that movement. Now inject computers and the ability to recognise patterns and make decisions in a split second to take advantage of such price movements.
The fight isn’t amongst people anymore, it’s amongst corporations with the fastest computing power, closest access to the exchanges, the best data scientists, mathematicians and string theorists. And if you think I am making this stuff up, I’m not. Read Michael Lewis’ Flash Boys and Gregory Zuckerman’s The Man Who Solved the Market”…
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