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Illiquid stocks


bennycx

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Hey guys!

 

Just need some help here. I have a fairly large order (~50% daily volume) sitting for an illiquid stock for a few days now but it is not executing because I've set it to all or nothing (don't want to keep paying transaction fees getting small pieces of shares). What would be the best way to even get a bunch of shares from these companies? Do I just have to sit there and wait until someone is willing to sell me that block of shares?

 

Cheers!

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Hey guys!

 

Just need some help here. I have a fairly large order (~50% daily volume) sitting for an illiquid stock for a few days now but it is not executing because I've set it to all or nothing (don't want to keep paying transaction fees getting small pieces of shares). What would be the best way to even get a bunch of shares from these companies? Do I just have to sit there and wait until someone is willing to sell me that block of shares?

 

Cheers!

 

It's why I use Ajay's team at UBS.  They will work the trade for us at their trading desk, and then we are charged solely on a per share basis.  Otherwise, you will have to look for blocks that are offered and try to buy them.  Cheers!

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Thanks mate!

 

Unfortunately I'm not investing a fund and do not have the luxury of using an investment bank! For individual investors like myself going through a normal broker, would I just have succumb to the fate of the luck? :S

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I use TD Waterhouse and have been able to buy multiples of daily volume by putting a limit order in and waiting.  You can also call the broker an they can see what is available and you can set your order based upon that info.  I was able to purchase a relatively large stake (about 2% of an illiquid  firm this way) but I had to call the broker for few days in a row until the shares appeared.

 

Packer

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Hey guys!

 

Just need some help here. I have a fairly large order (~50% daily volume) sitting for an illiquid stock for a few days now but it is not executing because I've set it to all or nothing (don't want to keep paying transaction fees getting small pieces of shares). What would be the best way to even get a bunch of shares from these companies? Do I just have to sit there and wait until someone is willing to sell me that block of shares?

 

Cheers!

 

It's why I use Ajay's team at UBS.  They will work the trade for us at their trading desk, and then we are charged solely on a per share basis.  Otherwise, you will have to look for blocks that are offered and try to buy them.  Cheers!

 

"work the trade" Care to explain a bit of the strategy behind that?

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Hey guys!

 

Just need some help here. I have a fairly large order (~50% daily volume) sitting for an illiquid stock for a few days now but it is not executing because I've set it to all or nothing (don't want to keep paying transaction fees getting small pieces of shares). What would be the best way to even get a bunch of shares from these companies? Do I just have to sit there and wait until someone is willing to sell me that block of shares?

 

Cheers!

 

It's why I use Ajay's team at UBS.  They will work the trade for us at their trading desk, and then we are charged solely on a per share basis.  Otherwise, you will have to look for blocks that are offered and try to buy them.  Cheers!

 

"work the trade" Care to explain a bit of the strategy behind that?

I believe it just means to attempt different strategies to get the best execution for large blocks of shares, usually illiquid ones. "pinging" for limit orders, doing stuff with VWAP (I'm no trader so I don't know the intricate details...)

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My broker (Fidelity) doesn't charge for partial fills if they all happen in the same day. But if part of the order fills today and another part on another day, I would be charged twice.    I've built positions in stocks which didn't even trade a single share on many days.    I've done this by picking off offers that I've wanted (and paying the commissions) over a number of months and years.  And disposed of it the same way.  If the stock is sufficiently undervalued then the commissions ($7.95/trade for me) are negligible in the end.  If your valuation turns out to be wrong then the commissions will be the least of your problems. Getting out of these stocks can be nearly impossible (without massive losses anyway) if the excrement hits the fan.  I'd imagine (but I don't know) that there would be a hefty fee to call a full service broker and have them trade it the way Sanjeev does.  Probably equal to quite a few $7.95 trades.

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Hey guys!

 

Just need some help here. I have a fairly large order (~50% daily volume) sitting for an illiquid stock for a few days now but it is not executing because I've set it to all or nothing (don't want to keep paying transaction fees getting small pieces of shares). What would be the best way to even get a bunch of shares from these companies? Do I just have to sit there and wait until someone is willing to sell me that block of shares?

 

Cheers!

 

It's why I use Ajay's team at UBS.  They will work the trade for us at their trading desk, and then we are charged solely on a per share basis.  Otherwise, you will have to look for blocks that are offered and try to buy them.  Cheers!

 

"work the trade" Care to explain a bit of the strategy behind that?

I believe it just means to attempt different strategies to get the best execution for large blocks of shares, usually illiquid ones. "pinging" for limit orders, doing stuff with VWAP (I'm no trader so I don't know the intricate details...)

 

Those details (or even broad concepts) are something that I would LOVE for Sanjeev to share. :)

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I was under the impression that one couldn't do all or nothing any more. Or is just on TSX stocks. I used to find it very useful on thinly traded stocks or to buy or sell a block with just one commission.

 

It was disallowed because all or none orders are a scam.

 

Suppose you have a AON (all or none) buy order for 100,000 shares at $10.00.

Suppose the bid becomes $9.00 and the ask becomes $9.90.  There are 100 shares at the bid and ask.  Your AON order doesn't fill because not all of it can be filled right away.

 

So the market maker sits there with a reserve order at $9.00 and slowly tries to buy up 100,000 shares.  THEN, your AON order will get filled for 100,000 shares at $10.00.

 

2- There are all sorts of other shenanigans that go on.  Sub-penny front running is one of them.  You're not allowed to bid for Citigroup shares at $3.0001/share, while market makers are allowed to do so.  So the market makers get to front run you at the expense of a fraction of a penny.  (They also battle each other so the front running isn't quite so bad.)

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Welcome to the world of liquidity discounts.

 

No-one is willing to sell because you're trying to buy too much, & too aggressively. If you really want the stock you'll pay up (higher demand, same supply). Either through additional commission on more buys, or via a higher price; your choice.

 

Most bigger buys fill as a result of bidding for a large quantity at a lower, but generous, price; on the day of a significant adverse market. You are effectively acting as market maker & offering liquidity (at a price) to anyone who needs out - at a bad time in the market.

 

Just be sure that it's worth marrying, because it could be with you for a very long time.

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Welcome to the world of liquidity discounts.

 

No-one is willing to sell because you're trying to buy too much, & too aggressively. If you really want the stock you'll pay up (higher demand, same supply). Either through additional commission on more buys, or via a higher price; your choice.

 

Most bigger buys fill as a result of bidding for a large quantity at a lower, but generous, price; on the day of a significant adverse market. You are effectively acting as market maker & offering liquidity (at a price) to anyone who needs out - at a bad time in the market.

 

Just be sure that it's worth marrying, because it could be with you for a very long time.

 

Slightly off-topic, but I really like the way you write. Keep it up!  :)

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Hey guys!

 

Just need some help here. I have a fairly large order (~50% daily volume) sitting for an illiquid stock for a few days now but it is not executing because I've set it to all or nothing (don't want to keep paying transaction fees getting small pieces of shares). What would be the best way to even get a bunch of shares from these companies? Do I just have to sit there and wait until someone is willing to sell me that block of shares?

 

Cheers!

 

It's why I use Ajay's team at UBS.  They will work the trade for us at their trading desk, and then we are charged solely on a per share basis.  Otherwise, you will have to look for blocks that are offered and try to buy them.  Cheers!

 

"work the trade" Care to explain a bit of the strategy behind that?

 

They do what any competent investment banker would do: they rip you off and try to make you feel good about it. The magniture of the ripoff depends on how smart you are and how much revenue they expect you to generate in the future. "Working a trade" is a great euphemism for "let's try and wait for a couple of days to match this trade off-exchange and rip off both sides with zero risk". Granted, there are some economies of scale at work here but most of the time everybody would be better off if they just routed their orders to the exchange through a cheap broker, for example IB. Happy to see that a lot of people here agree on that.

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Hey! Thanks guys!

I'm glad to say after sitting the order for more than a week, it has finally executed when I got back on Friday.. it must be the power of the board that answered the call..

 

Anyway my broker charges per day as well but the reason why I did an all or nothing is most of the time I see 100 or 200 shares trading everyday and the occasional 10k shares - I don't want to pay daily transactions to pick up only couple hundred shares! I guess I had no choice but to sit my order there and wait for the occasional big lot to sell into my order...

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Hey! Thanks guys!

I'm glad to say after sitting the order for more than a week, it has finally executed when I got back on Friday.. it must be the power of the board that answered the call..

 

Anyway my broker charges per day as well but the reason why I did an all or nothing is most of the time I see 100 or 200 shares trading everyday and the occasional 10k shares - I don't want to pay daily transactions to pick up only couple hundred shares! I guess I had no choice but to sit my order there and wait for the occasional big lot to sell into my order...

 

Now that you have the shares, care to share the name of the stock? There are a few of us who find these illiquid ones really interesting. ;P

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  • 1 year later...

Does IB or other brokers allow one to trade internationally with all or none orders? Or is this a function of the exchange?

 

Fidelity does not allow AON on international trades. If not careful, this can make things very expensive. I find the possibility of this occurring quite annoying.

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Not sure if IB offers them for international trades but as far as I know if you enter a GTC order with IB you don't pay extra if it is executed in multiple chunks or over multiple days. I assume that's the problem you are trying to avoid?

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