Single Share Bids in Illiquid Stocks (not DMA)

[Lizard]

Recently I have noticed that several very illiquid stocks on my watchlist have appeared to be bid at last-traded price. However, on opening up depth, it appears there is simply a bid for 1 share at last price and the next bid may be some distance below. Initially, I wondered if they were undisclosed bidders of larger volume, but I tested one with a sell and it was definitely only one share and did not appear to be replaced once the larger bid below was sold into (i.e probably not algorithmic trading either).

The effect of this is that, at a glance, it is not obvious that there are effectively no buyers at close to recent prices in some illiquid stocks - i.e. to a degree, it manipulates the quote (especially for investors that are not checking depth).

This seems to be a new thing and I have noticed it occurred at about the same time across 4 separate minnows in which I have spec holdings. So I am curious if anyone knows what is behind it?

[macduffy]

Possibly a technique to set a price for valuation purposes - estate bequests or similar. Are there any rules around such valuations eg time since last traded?

[Lizard]

The weird thing is that I doubt very much that any serious fund holds any of the stocks I'm looking at, let alone all of them.

That would tend to suggest it is an ASX mechanism of some description? Since it appeared across a lot of stocks at once, I presume it is a coordinated action of some description. It appears manipulative, but not sure if anyone has a motive to manipulate all of these.... so I'm wondering if just being used to smooth some stock data ASX supplies... e.g. I've noticed Yahoo charts tends to use bid prices (I think) on days when no stock trades and the charts go a bit zig-zag, despite not trading.

I might query it with the ASX. Either it is manipulative and they should deal with it, or it is an ASX mechanism and those of us trading in illiquid micro-caps should be aware of it and look beyond the quote.

[steve fleming]

yes - i have noticed this in at least 10 small/micro caps i follow.

Their purpose doesn't seem to move the price ( i.e. the bid is happy to sit there until its sold into), it seems more to manipulate the bid/ask spread, giving the appearance of a smaller spread than is genuine.

Eg ADQ - there has been a bidder for 1 share at 0.075 since last Thursday, the next bid is at 0.072 with the ask at 0.08, so it minimises the spread, maybe making it more attractive to trade?? (not that its worked with ADQ as there has been no trade since mid last week!!)

But the bid, as Liz noted, is always at last traded price, so it seems to have no impact on price.

[steve fleming]

A 1 share bid has just been sold into with NDL - so they are definitely genuine

a 200,000 NDL trade with 1 sold @ 2.5 and 199,000 sold @ 2.4

[Lizard]

Tried querying ASX and they referred me to ASIC, so I will try them - although that implies it is a manipulation issue and not an ASX data management/market operation issue...


Thank you for raising your concerns with the ASX Group. ASX appreciates information that is received from the public, as it assists with our function as a Market Operator.

You have indicated that the trading/conduct occurred after 1 August 2010. As of 1 August 2010, the Australian Securities and Investments Commission (ASIC) have responsibility for the supervision of real time trading and Market Participants. Accordingly ASX cannot assist you with the issue raised as it is outside of ASX’s jurisdiction. ASX’s responsibility as a Market Operator is to monitor and enforce compliance by Participants with the ASX Operating Rules.

Before I write to ASIC, can people give me a list of stocks they are aware of that have these bids in place? (PM if you want)

[moimoi]

Liz,

I have no idea for sure but have seen this for some time and believe it is part of computer driven trading.

I assume this because...

* as you would well know, no retail punter could maintain regular purchases of one share as brokerage costs make such stupidity.
* also because i have seen it in stocks that i know for certain there is large institutional holdings.
* and have seen the 1 share bid, and ask, perched throughout the depth not just at the last traded price.

And as per the "Bot Trading" thread...certainly appears manipulative.

[Lizard]

This is different to the algorithmic/bot trading that I am familiar with.

Some shares I can see that are currently affected are HIT, PEH, IVT, ADQ, RDH - all of which are so illiquid that no one is likely to be shorting or bot trading. Have also seen in ANO and RUB looks like it has just had one over-bid today on the back of an announcement (the one share bid still visible in depth).

[Lizard]

Okay, new theory... found this thread (http://hotcopper.com.au/post_threadview.asp?fid=2&tid=1727306&msgno=393129#393129) on HC.

So looks as though there was some kind of test programme put through a 1 share bid on every coy on the ASX last week and the ones we are noticing are simply residual orders in shares that haven't been filled. Goodness knows who is ending up with all the one share holdings though.

[Lizard]

Had a go-nowhere exchange of e-mails with the ASX on this - not because I was particularly curious, but because I'd e-mailed them to start with and decided to respond to their "go to ASIC" reply by noting that there appeared to have been one share bids across all stocks and pointing them to the list of residual bids I could find.

Was told that their investigations showed the bids complied with market rules and they would take no action. They were unable to explain why the bids might have been placed and suggested I contact my broker for an explanation (haha!). Not particularly surprised by this response, but notice the bids were then removed.

[drillfix]

Hi Liz, good on ya to see you taking some action. Get up them I reckon.

There is another annoying fact that also bothers me, and that is with the implementation of the new ChiX exchange.

What happens is whilst trades are going through that exchange as too the ASX, to me what the problem here is, is that we on the ASX (unless your a trade house) cannot see the price move if there has been a ChiX NXXT trade.

Meaning, if you are a trader (or whatever for a day) the price will sit there, and meanwhile somebody has just dumped 10 Million shares at penny lower, but yet the price remains the same as what was previously sold at (ie: 1c higher) so you cannot see the reflection of such price move (unless you go into the Time/Course of Sales to view the transaction of when and how much.

To me, this does not equate to an equal playing field. And in fact, its becoming worst more automation is implemented by more traders/houses/teams/programmers etc etc

And on top of that, aftermarket black pools where the word Transparency does not even exist.

Keep up the good work if you can get somebody to download the movies on my sig (Thrive & ethos) and watch them it shows you how much of every part of the system is manipulated to the larger degree and with proof. In fact, Everybody should watch these and pass that on because we are all being Played!

[Lizard]

And now the bids are back... oh well, they don't seem to reappear once they're traded, so probably not of concern.