No worries Satori. As long as the usual credits are given, im more than happy to oblige :)
Mr Mickles, let me tell you a story.
One day there was A Large Investment Bank.
This A Large Investment Bank handles several products for its high net worth clients as well as its own proprietary trading desk handled by one of its top traders.
Lets say we have the eccentric trader Yacheng (hope its ok to use you :)) managing the High Yield (Speculative "A") fund and Foxtrot managing the proprietary trading desk at for the firm. Yacheng as part of his analysis and ever-bullish sentiment on SDL decides to increase Speculative A's exposure to SDL from $20 million to $40 million over the current Quarter to gain exposure to expected-to-be-positive DFS, Financing, Partnership deal announcements etc etc.
He employs a 'vanilla' accumulation bot to buy up to 36,2000,000 shares in SDL over the Quarter with an average VWAP of $0.55 per share and programs the bot to purchase a random number of shares between 1,200 to 200,000 weighting the probability of buying a higher than lower number of shares proportionally based on the share price (i.e. more likely to buy up to 200,000 shares when SP is closer to 0.55, and more likely to buy 1,200 shares when SP is closer to 0.48 or 0.58 - note purchases are also less when SP is below Expected VWAP so less are bought during share price dives giving more time for the human analyst to re-evaluate the situation and make the necessary adjustments to the algorithim). The bot is programmed to run this calculation every random 3-15 minutes, with a minimum share accumulation of 4 million shares per day, and maximum of 6 million per day.
On the other side of the table we have Foxtrot, who manages the firm's proprietary trading desk (i.e buy and sell shares for the sole benefit of A Large Investment Bank).
Foxtrot comes to work over the weekend at 7 am sharp. Looks up the news, market wraps overnight etc and seeing a green lead from Wall Street, bullish IO prices, growth in China, ease in worry over the EU debt crisis and cooling of tensions in the Korean Peninsula places an order for 5 million SDL shares to be bought at open over Depths of X number of shares @ 0.560, Y shares @ 0.555, Z shares @ 0.550 and C number of shares @ 0.545.
Foxtrot receives a email on his Blackberry from his supervisor A Mean Boss who wakes up one morning at 9.45am with a hangover..logs on the hotcopper and reads the firm's internal overnight market review wrap newsletter, and sends a email saying "Foxtrot, SDL looks over cooked, Hotcopper posters are looking overly enthusiastic. SDL off the floor please".
Foxtrot PULLS 4 million shares of to-be-bought securities off the market just before pre-open.
A Large Investment bank has 10 million shares in SDL, putting 10 million shares on 0.515 just before open in the morning is gonna scare the living daylights off other traders probably prompting them to sell at a panic - A Mean Boss doesnt want this as this means that A Large Invesmtment Bank will get less per share than it could if it didnt scare the market and instilled a false sense of confidence.
So, Foxtrot employs a vanilla selling bot to buy up to 1 million shares at open, instill a false sense of confidence at open, get the SP to reach a comfortable level ABOVE the Day Trader's stops placed on the previous market day then tell the bot to sell 100,000 shares every 1-5 minutes.
Day Traders lower their stops due to positive open, mums and dads pull their sell orders waiting in queue on this confidence, and investors buy from the green lead from overseas and SDL is up 1.5% at open. Now, after the initial purchase of 1 millions shares, the bot kicks into action. On the other side of the office Yacheng is sitting back drinking Dom Perignon champagne while his little vanilla accumulation bot is working hard.
On ASX, ASIC sees
10:30:12 100,000 - A Large Investment Bank SELLS at 0.550
10:30:15 500 - A Large Investment Bank SpecA BUYS at 0.555
ASIC calls up. Calls A Mean Boss to a meeting to discuss 'irregularities' in the trading of SDL securities. A Mean Boss calls the parties involved to attend. At the meeting Yacheng tells his side of the story and Foxtrot shows ASIC the email on his Blackberry and ASIC walks away red-faced.
And they lived happily ever after...
Hope this helps :)
Foxtrot
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