Why such high buying at EOD?

[ALFguy]

Sorry if this is obvious to everyone here but I can't figure this one out.

Was looking at BHP near close of trade today and noticed that, even though the stock was trading around 29.7 to 30.6, there were number of late buys at 35.0 and 36.2!
I understand this is where the professionals come in but surely this is buying way over the price?

What's the reason?

 

[tech/a]

End of day auction.
Prices are averaged from highest bidder to lowest seller.
If you have 20000 Sell at $20 and 20000 Buy at $30 then they will be filled at $20.
Ends up as an average between sellers and bidders in the final auction

 

[yogi-in-oz]

Hi ALF,

..... you are probably referring to trading, in the
final settlement auction.

In such cases, you will also see extremely low sellers
as well as high buyers, as they jockey for positions in
the final sales of the day ..... those overlapping prices
only determine their place in the queue and mostly
do not represent the actual settlement price.

You can find the actual formula used in the final
settlement auction, on the ASX website.

happy days

yogi

 

[ALFguy]

Interesting! I did wonder why they didn't affect the high/low for that day, so that explains it.
Will read up....

Thanks guys (girls?)

 

[bullmarket]

Hi Alfguy

Normal trading stops at 4pm and then there is a 15 mins closing price auction where anybody can put in whatever buy/sell orders they like.

As soon as there is an overlap between the highest bid and the lowest offer, SEATS goes through a 4 stage algorithm to calculate the IAP (Indicative Auction Price). It's not as simple as just averaging the bids and offers...if anything it's a sort of weighted average of all relevant bids/offers but the exact process with examples, if interested, is described on the ASX site....do a search on 'closing price' and you should then find it.

At 4:15 as stocks begin to close in alphabetical order, for each stock all orders with bids above the IAP and all orders with offers below the IAP are executed at whatever the IAP is at the time and that IAP becomes the quoted closing price for the day..

hope this helps...

bullmarket

 

[cashman]

Thanks for the info Bullmarket

I always thought at 4pm the market was closed.

So if i am late >4pm and < 4:15, i can still enter the order and likely get filled at the closing price ?

Cheers

 

[bullmarket]

No problem cashman...

Yes, between 4:00-4:15pm anybody can still place buy/sell orders at any prices they like but those orders will not be executed until 4:15 as I described earlier.

So to summarise what I posted earlier, if during the closing auction you want to buy then place your buy price at least 1 tick above the IAP and if you want to sell during the auction then place your sell price at least 1 tick below the IAP.....but beware that the IAP can change during the auction as orders are placed by buyers/sellers......what really counts is what the IAP is at 4:15 because that will be the official closing price for the day.

So at 4:15, if your buy price is below the IAP or if your sell price is above the IAP your order will not be executed at closing but your order will still remain in the market depth as per usual and so will still be there on the market opening on the next day.

Also, please note the closing price auction process is exactly the same process that SEATS goes through from 7am - 10am when the market opens or just before any trading halt ends, for whatever reason, when the stock goes into pre-open for at least 10 mins usually.

cheers

bullmarket