Trading Analysis - 23rd Oct 2018


23 October 2018

12 noon

Seems like I can use much of the comment from the previous day - Strong buying from the start yet again. Despite trying to mark the SP down from the off the Market Makers were forced to lift the Ask before 9am and then subsequently were forced to try and balance their books by taking another 500K block and then a 250K block (as a duplicated pair) from their magic bag-o-shares (aka First Island.)

A tentative drop back in the ask around 10:20 led to a quick flurry of buys, moving the buying price up to 29.0p where it remained for about an hour, albeit in the face of only light buying volumes. A couple of chunky fatbanker buys just before noon lifted the nett Market Maker position to c. +250K more Buys than Sells. A little more buying and we may well relieve another chunk of shares from the hands of First Island.

End of Day

Lots of delayed trade reports today that make for very interesting analysis.

Working backwards from the end of the day we find at 14:19 multiple 500K trades. As per yesterday on we see only two 500K trades at slightly different times, whilst on ADVFN we see the first 500K trade at 28.70p (14:19:16) followed by a duplicate pair of 500K trades at 28.55p (14:19:47). This is the same type of triplicate structure that was observed yesterday. Result: only a 500K First Island sell is counted, followed by transfer (via an intermediary MM) to a short-holding market maker, to reduce their short size by 500K. That was the rightmost green marker.

Moving to the left we find at 13:53 another 250K Sell -  again suspected to be from First Island, but this time this block of shares doesn't get handed on - instead it gets used simply to plug the hole caused by the excess of Buys before 2pm. Another 250K from First Island believed to be gone.

Now to the leftmost green marker - notice anything different from the chart at the top of the screen ? Yep I've taken away a trade just after the Bed&ISA at 09:11 - how come ?

The trades at the end of the day are listed as (

The 5 trades highlighted in green are the ones we are are interested in.

Prior to 5pm the 750K trade at 9:04 was not shown - I had believed that there were two duplicate pairs in play. However the 750K trade changes all that - I find it too much of a coincidence that there was a 750K sell just a few minutes before two duplicate pairs of sells. If you took all of these as individual sells you would count 2.25M Sells - and yet there is zero impact on the Bid, Ask or trading levels !

The relationship between the duplicate pairs and the 750K trade also mirrors the same structure that is found in the triplicates that were observed both yesterday and in the afternoon today - the first trade is marginally higher priced than the subsequent duplicate pairs. Both pairs are priced at the same level, and 750K=500K+250K - thus we have to consider the possibility that we are seeing something not previous observed and which is most accurately called a split triplicate.

This interpretation only counts a single 750K sell from First Island and distributes the shares to two market makers, quite possibly different ones, via an intermediary. As can be see from the end of day chart this interpretation yields almost perfect balance for the days trades - not conclusive but clearly a much more believable interpretation than one which sees 2.25M shares enter the market without so much as a leaf fluttering. 

Why split the trade up in quite such a complex fashion - perhaps two different market makers are short and are trying to close their shorts, perhaps only one is medium-term short and the other is just filling a hole caused by this morning's buying. Perhaps both the 250K and 500K are for the same market maker and they are splitting up the trades like this just to make it difficult to see through. We are not given the information to be able to decide this. This is by design.

What we can say about today though is that there is strong evidence that another 1.5M shares have been taken from First Island. There is reasonably strong evidence that 1.25M shares may have been taken by a market maker that was short, and, here's the kicker, there is also very strong evidence that despite this the overall Market Maker short position has not altered.

The implication is that a short run by one market maker may now be being closed whilst another market maker is growing their short position. Is this the sign of terrible collusion amongst the Market Makers - no, it is actually healthy competition - one Market Maker, seeing that one of their colleagues has perhaps overextended themselves is choosing to short against them. Ohhh, the irony.

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