End of day selling on NZX

[Temoana]

Can someone explain to me what I have observed when watching the Depth screen in the “pre-close” (4:45 to 5:00pm) period of the NZX. I will use today’s CEN trading as an example but I have seen the same sort of thing with other regularly traded shares. I have watched the changes over this period and it looks dodgy or at least I am quite confused as to what is going on :confused:

At the end of the normal day trading period (4:44:59) the last sale in CEN was 471 at 4:44pm with it trading during the day being between 467 and 474.

Between 4:45 and 4:59 various Buy and Sell orders came in and some change or were removed over this period. By 4:59 there were Buy orders at prices way above the days trading. Today there were Buy orders at 505, 500, 495, 490, 485, 479, 475, 474 and down. Likewise in this period, there were Sell orders at way below the days trading price eg at 450, 453, 471, 472, 473, 474 and up. The overlapping prices all came onto the market between 4:45 and 4:59.

At about 5:00, all the orders that overlapped and for which there were sufficient matching volume were traded, but they were all traded at 473 in spite of what Buy or Sell price was actually set. So today that meant that all of the Buys from 505 down to 474 and all of the Sells from 450 up to (some of) 473 were traded.

So can someone tell me what is happening here? Also, why is the outcome of trading in this period used as the day's closing price? And thirdly, can this period be used to ones advantage to get an advantageous buy or sell.

(I hold CEN)

Regards
Temoana

[777]

It is normal. Happens at opening time too. Also occurs on ASX. It works well.

[lou]

It is normal. Happens at opening time too. Also occurs on ASX. It works well.

What is it? Why is it happening?

[Omega]

Here's the ASX link explaning how it works.

http://www.asx.com.au/products/calculate-open-close-prices.htm

[777]

Thank you Omega. This topic raises it's head from time to time and I tried to find an old thread that covers it but they don't go back that far. May be there is an archive of old threads but I can't find it.

[Temoana]

Thanks all for the comments and link. The link explains whats happening from the ASX/NZX perspective and how the sale price is arrived at but not from the traders' perspective.
So to pester this a little more:
Say I wanted to buy 3000 CEN shares in the preclose period. What is to stop me offering $10 each for them and so get to be the first in line but realising that they would actually go for $4.73. Alternatively, why were there bids at $5.05 last Friday. I assume these buyers had no expectation of paying that much. Is it likely that these are corporate/professional traders or the yous n mes?

Can anyone comment on using this part of the trading day to their advantage?

[777]

You take the risk of sellers pulling out at the last minute. In your example you may pay higher than 4.73. With lots of sellers this unlikely to happen but if there was only one seller it could.

[Silverlight]

Can anyone comment on using this part of the trading day to their advantage?

The whole point of the closing auction is to have a fair price for the last price of the day, and the closing auction achieves this by all participants who need to sell or buy before the end of the day placing their orders into the closing auction for 15 minutes, and all receiving the same close price.

The biggest advantage for the closing auction is volume, if you have a large line to buy or sell, you put it up at 4:46pm, everyone else in the market can see it there, and have the opportunity to sell into it or buy a part of it, without disturbing the market price.

Closing auctions are also the cleanest way of identifying people with the intention of manipulating the close price, as for example you need to buy or sell 1 million shares in say Telecom, you make your intentions clear by 4:55 and the market adjusts. Any participant entering or removing orders that change the close price in the last 5 minutes are eaisly identified as moving the price, and therefore subject to prosecution on manipulation of the close price.

[stoploss]

When was the last time NZX fined someone for this then ??



The whole point of the closing auction is to have a fair price for the last price of the day, and the closing auction achieves this by all participants who need to sell or buy before the end of the day placing their orders into the closing auction for 15 minutes, and all receiving the same close price.

The biggest advantage for the closing auction is volume, if you have a large line to buy or sell, you put it up at 4:46pm, everyone else in the market can see it there, and have the opportunity to sell into it or buy a part of it, without disturbing the market price.

Closing auctions are also the cleanest way of identifying people with the intention of manipulating the close price, as for example you need to buy or sell 1 million shares in say Telecom, you make your intentions clear by 4:55 and the market adjusts. Any participant entering or removing orders that change the close price in the last 5 minutes are eaisly identified as moving the price, and therefore subject to prosecution on manipulation of the close price.

[Silverlight]

When was the last time NZX fined someone for this then ??

If you mean market manipulation of prices, ring the FMA and ask them (http://www.fma.govt.nz/about-us/contact-us/), its their law.

Before market manipulation came into law in 2008, and it was NZX's jurisdiction here's one case I found, http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10520048

I am sure there are plenty of others, do some digging, at let us know.