Closing Auction Conundrum

[striker]

I bow to the infinite wisdom of Dixie and Avs ,and I apologise most humbly for my small trader status and having to ask such dumb questions in order to fully understand the concept of a closing auction.One more dumb question,if I may,what purpose does this auction achieve that cannot be achieved in the normal open trading hours ?

[#2]

You've still got 500k volumes to process for the day, say, and any takers have the opportunity to arrive in that 10min interval to match your order,.. as far as i gather that is,.. I mean, you could have dumped them on the market during the day, yet that could have railed the price somewhat, hence a closing auction,.. eh!? mind you i know very little myself so i am open to correction,..

[#3]

Hey Striker, if I gave the impression that I know it all, then it's unintentional, and purely because I might have randomly placed the right words into the right sequence. Or something pretty close to that. Small trader status? we in the same boat buddy.
There are some very big traders out there who have a helluva lot more money, and who make some pretty stupid trades. Same as we do. The secret is most certainly not in the size of the account, eventhough is does make it easier in some instances.
What does get up my nose is people who always assume that the 'bosses' or rich businessmen in general are always out to 'get' the smaller guy, that 'capitalists' are an evil breed because they 'exploit' the poor, 'corporates' are there to shaft the customer. It's this kind of thinking that leads to the 'poor' (you & me) users so easily criticising any new feature or product that gets presented to them. Rather than doing a bit of effort into understanding something, it's easier to drag it through the mud.

[striker]

No problem AvS,it's just that I would like someone ( maybe Simon) in simple ,easy to understand language for a lay person like me, to explain the purpose/necessity of the auction. Like I said , yesterday someone bought 2150 CZA shares at 1700hrs at R1.00 cheaper than the trade just before it!That to me is a distortion to the trading that took place during the day.Looking at CZA's trades today 2150 shares werw sold at R32.70 odd . Mere coincidence ??? If not this guy made some R1800.00 overnight by buying on the auction.

[#5]

Ok, case in point. I'm looking at GFi right now. @ Market bids & offers are fairly balanced, but there's a BIG sell at 9350. Which means the price will not close above 9350 unless a buyer wants to buy higher than that. Let's see.

[#6]

Ok, case in point. I'm looking at GFi right now. @ Market bids & offers are fairly balanced, but there's a BIG sell at 9350. Which means the price will not close above 9350 unless a buyer wants to buy higher than that. Let's see.

[#7]

Ahoy mate.....good to see u round here....shakey fingers there....talking of which....off to me bar and hope dow falls to @#$% so that I can get C-man off my back....you know how he gets at this time of the moon cycle. adios!

[#8]

Right, so there were multiple orders all over the place buying from 94xx to selling at 93xx. The total @market orders were around 11000 on either side, which basically cancel each other. The order to sell 410000 units at 9350 wiped out all the BUY orders above 9350. Which is why the close was at that price. And you didn't even need a calculator.
Now if a big buyer came in and put in an order to buy say 500k units at 9400, then he would have wiped out all the sellers below 9400 and the price would have closed at 9400. But sometimes the buyers and seller balance each other, then you have to total up one side and compare it to the other side to determine the closing price. There's no magic or manipulation there.

[#9]

Hey buddy! it's been a while.
And ya - maybe I should start playing the drums - it's a natural outlet for parkinsons... or is it altzheimers? I forget...

[striker]

AvS - you take a look at any of the 17.00 hr.trades like SOL . 130,000 shares traded at R2.00 cheaper than the trade before. One trade no matter the size ,influenced the closing price ,which in the six and a half hours of normal trading activity , did not. I still say , if one final auction trade determines a closing price,why bother trading in open hours !!! I need Simon to explain this to me in plain old English.

[#11]

Striker, you have to watch the action during the auction. On SOL, that would not have been a single buyer/seller involved there, but many. You could also buy/sell in the auction yourself. What you have to watch for is the BIG seller who is taking profits, and who doesn't mind taking a R2 loss on say Sasol as long as he can get his 10% or 20% or whatever target. The price would then close at HIS price, and he'll push the price down, just the same as in normal trading.
Similarly you have to watch for the BIG buyer who wants to get IN because he thinks the current price is good, and that there are enough sellers in the auction to feed him. If he REALLY wants to buy, then the chances are that he will push the price up a bit.

[Rogue]

Same stuff with AGL and BIL in the closing auction.Think AGL lost half it's price in % in the auction.Same goes for BIL.Think some clever people are just dumping shares at the closing auction cause nobody would take that volume at their price in the trading day,hence pushing the price down.Look at ADW closing auction's for the last couple of days.

[striker]

AvS -- Have a look at the situation with SNU (SENTULA) today. Trading in this share was suspended the entire day by the JSE. Unbelievably at 17.00 hrs. 4 trades are allowed to go through, dictating the price that nobody else could have any part of the whole friging day !!How can 4 trades to a select few be a fair practice, or a fair reflection of market forces ????? It's almost certain that most traders were not even aware that the shares could be traded,or was it only for a select few?????

[#14]

Striker....those trades are inter-broker or pre-booked trades which were done when the share was open for trading but only booked now.....happens all the time amigo!

[#15]

Striker those are not a 'select few.' If you placed an order some time through the day then they would have traded same as anybody else if your price was right. Might even have been brokers trading that.

[striker]

But surely if a share is suspended , nobody should be allowed to trade it?

[SimonPB]

OK, the closing auction. Trading stops at 4.50pm and for the next 10 minutes orders are placed but not matched. Anybody can place any order at any price. Then at 5pm (give or take 30 seconds) the system automatically works out at what price does the largest volume transact - then that's the final trade. It can include many people on both the buy and sell side.

So yes a large seller or buyer could see the price trade above or below the previous price, so what? Tomorrow is another day and no one person can keep a price either up or down for ever (assuming it is a decent liquid stock).

Last point is that this is a way way better system then the previous. In the old days normal trading happened until the close and the last trade could be for 100 shares or less. Imagine how you'd feel if the last trade was 1% lower then the previous, but the value of that last trade was tiny??

[striker]

Thanks for that Simon, but I still don't believe it works any better. Closing small trades do still effect closing prices. Also I cannot believe the final bid and sale however large, can match the total volume of all trades done in open hour trading (liquid stocks). In essence therefore, one sale during ten minutes of trade, and probably representing less than 10% of the entire days trade determines the share price. How reflective can that be of a stocks true value? Also, in that last 10 minutes when I attempt to do a trade, your system under shares that can be bought / can be sold, reflect zeros in both cases. So can I trade in the closing auction??

[#19]

I'm sorry Striker, maybe I've missed something. But it seems that you've carefully ignored this whole thread. The same things are being said to you repeatedly by several different people.
You're either pretending to be obtuse or just plain argumentative.
Why not just trade the auction like everybody else? If your price is reasonable, you will get filled. Any other questions about the system, its efficacy, its fairness have already been answered.

[striker]

Read the thread of my argument carefully ,and the specific stock examples given.Any case ,healthy debate and counter views cant ever be a bad thing.