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Perrin

Uncrossing Trade

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I'm trading stocks in the UK. At the end of the day, there's an Uncrossing Trade (UT) which is reported. This always seems to be large volume. Can anyone explain exactly what an Uncrossing Trade is? Or direct me to some light yet informative reading on the subject (ideally on the other types of trade types, too). I've read bits and pieces but I'm still not sure. My broker lists 32 different types of trades such as AT Automatic Trade, L Late Trade, O Ordinary Trade, but the information about them is not very informative. What on earth did everyone do before google and Traders Laboratory???

 

I know that I don't need to know this stuff to trade, because all I do is look at some bars on a chart and I ignore almost everything else. Whether that's right or wrong, doesn't matter really. However, being a curious sort, and of course being concerned that not knowing the ins and outs of trading may put me at risk, I thought that it might be useful to understand out what these AT, L, O, B, UT, etc., are. And not just the basic definition that the stockbroker states, but what it means in reality.

 

Stockbroker standard definition of UT - Uncrossing trade: "This is used for for the single uncrossing trade detailing the total executed volume and uncrossing price as a result of a SETS auction."

 

I understand there is an auction at 4.30pm after the UK market closes. Quite why, I'm not sure, as I did think the entire trading day is somewhat of an auction. In the modern day with the computer connections we have, is the 4.30pm auction necessary?

 

The Uncrossing Trade seems to have an effect on the last price (what I did consider the closing price). Is the auction then just an extension of the trading day for a certain section of people? The closing price (at 4.30pm) does not stay the same, by 5.00pm it has changed. The logcial part of me used to say that 'the last trade for the day made at 4.29pm and 59 seconds is the closing price' - but this is not the case. I assume due to the Uncrossing Trade?

 

My assumption has been that the Uncrossing Trade is the total volume, and average price, of the 4.30pm auction. Is it also the secret (?) or large (?) or unreported trades that were done during that day? Reading the list of different trade types, it seems as though some trades do not have to be reported when they happen, they can be revealed hours later, or at the end of the day instead?

 

Who puts orders in to be filled during the Uncrossing Trade SETS auction? I currently think that it is big market makers, stockbrokers and such. Is it because they have traded during the day only with themselves - e.g. In total, their clients bought 50,000 shares in a particular stock and sold 20,000. They do not trade any of those in the real market during the day, instead they just buy 30,000 (the balance) during the auction at 4.30pm?

 

Any thoughts or information to put me on the right track would be appreciated :)

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your broker should be able to answer most of these questions - or at least the LSX....and on looking at the LSX their glossary is about as circular as a hamster in a wheel. :doh:

 

I dont trade UK stocks, but at a guess from what i have known elsewhere below are random thoughts......

 

Why a 4.30 trade?

To allow unfinished orders to be completed.

eg broker had 1million to buy over day, they completed 990,890 and the balance is to be completed, and oddlots are not left over.

or, some funds, brokers, clients try to get set on as close as possible to the end of day price.

or sometimes trades during the day have been amalgamated and are crossed and booked out to a client. Sometimes its part of two different clients matching orders and they want a price to just transfer stocks.

 

This of course means there is two closing prices (usually called a different thing - eg; last price, or settlement price) - but they are generally fairly close.

 

............

I would think your assumption that the volume is simply the matched trades at the 4.30pm auction is correct.

 

.............

Who puts them in?

if you have direct market access and can see the crossed over prices before they match out, then i would assume you should be able to participate as well. (I dont know)

 

.........

Its like a cleanup session for the end of the day.

 

..........

usually to find out more, you need to do the operators licence exams, or maybe the IMC courses......

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Hi Perrin,

 

As I recall, 'uncrossing' is a form of settlement process, and has different meanings according to the exchange. I think in some cases it may be as simple as the middle of the spread wherever that is a possible actual price. A volume weighted approach is also sometimes taken, I believe.

 

One place to look for more info might be relating to the Hang Seng - I seem to recall that this closes completely for several hours mid day, and goes through a crossing/uncrossing process for each session (that could be complete nonsense though - it's years since I took any interest in stocks . . .).

 

If you're worried about not understanding it fully, or the implications for your strategy, then why not just avoid trading into the close of session?

 

BlueHorseshoe

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Hi guys, I asked because there are things that I know that I don't know, that I probably should know. :)

 

From experience, the end of day settlement doesn't seem to make a huge difference to the final price, and doesn't affect me much as I'm swing trading over numerous days not just over 1 night. I am curious about it though.

 

Thanks for mentioning the Hang Seng – I checked it out – weird charts. A gap in the middle of the day. I guess it's a way of trying to keep a more ordered market. Allows them to have dinner too, without worry.

 

You make a good point that my broker should be able to answer most of these (or any!) questions. I shall email them with some.

 

I looked at the London Stock Exchange website last year and it was not very clear to me. I will sit down one afternoon again and have another look through it. Now that I know more than I used to, some more of it might make sense (hopefully).

 

Regarding operators licence exams, IMC courses - I've never thought about them before. I never even knew they existed for that matter. Of course, when I think about it, every profession has rules, ways of working. Are the courses any good I wonder? Would I learn anything new or useful? I will do a bit of research on them too, thank you. I wouldn't need to take an exam but if I find some course material it might be useful, (then again, I'm not planning to have a career working for a trading company, so I think the only thing I need to understand is when to buy and when to sell. Simple!)

 

Thanks for responding :)

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