Is there a SEC rule that limits big investors how much stocks they can sell at once? I read somewhere (can't find the source now), that mutual fund, hedge fund managers, big investors have to unload their shares gradually and not at once. Is there a written rule like that or is it just that they don't want to do it since they would move the market with their own doing? If there is rule like that can someone provide a credible source. I've looked but can't find it anywhere. Thanks in advance
There is no such rule. You can sell as much as you want or rather as much as the market can accommodate. Obviously, you want to have as small impact on the market price as possible.
MTE is right. The reason they gradually sell off is because of the relationship between the massive amount of shares they own and the limited number of people that are interested in purchasing shares at that price. Take a look at May 6, 2010 to see what happens when large accounts sell too much at once. It's not prifitable for the one doing the selling. It's not mandatory to sell off piece by piece, but in most cases it is wise to do so. The market is made up of people, and people respond emotionally to fast price movements. The goal of most large accounts is to sell off or buy in such a way that the sentiment of the casual trader/investor is not shaken. Occasionally, however, someone like a hedge fund will sell off large ammounts intentionally in order to get small accounts to panic and sell off too so that the hedge fund can buy back what the others sold at a much lower price. A good example of this is today (8/9/2011) at 2:25 pm. Look at the $2.50 point drop in the DIA on 1,200,000 shares on a matter of 4 minutes. then 90 % retracement in the next 15 minutes. This was likely someone hunting stops to try and shake people out.
I can't resist this. Blocks are often negotiated between institution and specialist/market maker. In turn often with concessions. These negotiated blocks do NOT have to appear on tape (unless the ax wants to leave impression) thus rendering time & sales dubious. On the sell side, the ax works off that inventory in the ensuing hours, days, weeks, and depending on liquidty,.......months. As for people responding emotionally, that may be the case in terms of emotions, but they DON'T act. This is one way an ax maneuvers. Racing down to his objective, cleaning out sell stops, but with minimal public participation (unless he wants more inventory). Only the locals, who in case of the NYSE have purchased seats, hunt stops. In clusters. Makes swing bottoms. What other bullshit do you want me to dispel?
you sure that a large block does not have to be printed to the tape? I think this is wrong. You mean to tell me a mutual fund can sell 10 millions shares and nothing shows on the tape? I call bullshit. It may not show realtime, but it shows. and what makes you think anyone is taking in huge blocks of anything these day? can they afford to take a 10% loss, for a 1% discount on a huge position?
I don't think so there is any limit the big investor can sell share as much as they can depending upon the market situation. http://www.financeninvestments.com/finance/who-must-file-tax-return.html