Buy & Sell Shares Terminology

S

Saibhris

Registered User
Messages
10
Sometimes when reading articles discussing the trading activity of a given share, I might see a statement such as "..a good day for Company X...there were over 100 buys and only 5 sell orders..". This I find confusing, because in order to complete a transaction a buyer and a seller are required. Therefore, how can you have more buys than sells?

Can someone explain what the scenario is behind this terminology?
 
well not all orders are the same size! i am not too sure where you are getting this information from because no one knows how many individual order there are in any one stock - brokers only know what orders they have, not the entire market in a single stock.
 
i now see your point. looking at the buy/sell column it does state that these trades are assumed. if you compare the traded price with the bid/offer spread at the time the sales are taking place on the bid and the buys on the offer. i suspect that if a trader is moving accross the spread to 'lift' the offer then this is consdiered a buy and vice versa for a sell. but as you point out there is a mismatch between the value of the buys and the value of the sells (which is impossible) but since they are assumed then the data is pretty useless.
 
Saibhris said:
Taking a random example, here is a sample of market trading data for CRH.

http://www.sharecrazy.com/share2607share/share.php?disp=volume&order=0&epic=CRH

You can see that some trades are regarded as a "Buy" and others are regarded as a "Sell". However, even when a trade is regarded as a "Buy", then surely there must have been a seller? So what convention is being used to determine whether the trade was a "Sell" or a "buy"?
Click to expand...


Hi all,

I provide the data for the link posted above, which is how I found this thread.

Each stock has a number of market makers (varying from about 20 for large FT-SE companies to 1 or 2 for smaller AIM/Plus Market companies) who hold the available amount of shares in issue between them.

In the link you posted, you will see a "Bid" and an "Offer" price. These represent the best price the company's market makers will either sell the shares to you (the offer) or buy from you (the bid).

Trade records are provided by the London Stock Exchange and each trade record is not identified as to whether it is a buy or a sell. Therefore, you have to make the assumption that if the traded price is closer to the offer price the transaction was a buy, and vice versa.

This is a far from ideal situation, particularly if the bid and offer prices are quite close together (the spread), and transactions that are actually buys can be assumed as sells etc.

Until the London Stock Exchange and FSA allow a level playing field where private investors are given the same level of information as institutions, this situation will persist.

The trade figures are basically a list of all the individual activity between the market and the market-makers that day. The amount of buys and sells are very unlikely to be the same.

Because of the margin for error, trade data should certainly not be relied upon as a basis for investment.

However, the data is not entirely useless. It will generally be very close to the getting the total number of buys/sells correct (whether each individual transaction is correctly assumed or not). Also, it gives lots of information about the frequency/size of trading and the type of trade that is being conducted.

This is a rather general description, but I hope it answers your question.

Cheers!
 
Last edited by a moderator:
Very few of these trades are market maker trades. the stock in question, CRH, trades on SETS (the LSE's main trading platform) & Xetra (the ISE's trading platform) so anyone with access can trade this name. The bid and offer in liquid names such as this are not determined by market makers, but by individual orders that individual traders (or market makers) have placed in the order book. Not infrequently the bid and the offer is determined by trading algorithims (i.e., computers) who are always best bid or best offer.

In reality, the role of market makers in liquid names such as this is minimal at best becuase such stocks trade in an order driven market. Almost every buy-side institution and hedge fund has direct market access and would only use a market maker in a liquid name if they want an instant price for big size.

On a quote driven market, market makers provide a minimum level of liquidity at the bid and offer but to a large extent the price of the stock will ultimately be determined by the actions of the real buyers and sellers - the institutions and the retail investors.

Market makers doe not hold the available amount of shares as you put it - the shareholders do. In illiquid small-cap names market makers are a necessary evil as there is not enough trade activity.
 
You must log in or register to reply here.
Back
Top