just wanted to know if anyone out there knew what and how stocks are crossed and how to profit from it by reading the tape.... I have the general idea of how and why but would appreciate someone's input......Deeman...you seem to have a lot of knowledge in this area......Don or Rtharp as well Thanks:
An upstairs trading firm such as Goldman or whatever finds a buyer and a seller for a block of stock. The brokerage firm has his floor broker (or a two dollar broker) check the stock on the floor (i.e., are there market buyers or sellers on the floor, etc.). This is done to find the "right" price. After consulting the floor broker, the upstairs traders talk to both sides again to tell them that this can (1) either be done or (2) cannot be done. If it cannot be done, then the brokerage firm either does not do the trade or they print the block on a regional exchange. For example, institution A wants to sell 250,000 XYZ stock. Instiution B wants to buy 250,000 XYZ stock. They want to do it at 100.00. Currently, the stock is 100.20 x 100.50 10,000 shares up. Now on the floor, brokerage C is a market buyer of 50,000. Under this scenario, this cannot be done at 100.00 because brokerage C will break up the cross. This can be done at 100.00; however, if Institution B buys 175,000 instead of 250,000 (i.e., brokerage C buys 50,000 at 100.00 and the book buys 25,000 at 100.00). If Institution B agrees, then the trade is done. If Institution B does not agree then the trade is not done (unless it is done on a regional) since the trade would be broken up on the NYSE.
freehouse: Excellent description. I couldn't have described it better myself. nylord1: As far as profiting from this occurrence, unless you have the knowledge beforehand that the print is going up it's not that easy. If the stock has been trending down and then a large print goes off below the bid, this can usually lead to a short term reversal (and sometimes a long term reversal if it was a "cleanup" print - this is when the Specialist will participate and buy some stock himself). The same can be true on the other side too. But if the print goes up on a regional exchange (usually the Midwest) as freehouse pointed out, you can bet that there was interest on the floor of the NYSE (either other buyers/sellers or the Specialist wanted a piece of it). In this case it may be harder to profit from it since most of these prints happen at a discount, and if you use freehouse's example, the print goes up at $100.00 on another exchange, while someone is bidding for stock at $100.20. After finding out that a large print goes up elsewhere (Sometimes it takes longer then you would think), the buyer tends to feel that he is "paying up" by bidding above $100.00 and will pull his bid. This will have the effect of actually having the stock pull in (sometimes even below the print price) before heading back up when it is realized that there aren't any real sellers out there. And yet sometimes the buyer will feel that he just missed out on maybe his only opportunity to get stock and will start to get more aggressive and take as much stock as he can before everyone else does the same. I tend not to react to the large regional prints as it complicates the situation and requires more thought on my part (not a good thing...) Darren