Block Trades

A significant amount of large block transactions of stocks are still done through brokers and various phone transactions. It used to be that it was the only way for a large institution to buy or sell a lot of stock. With the introduction of algorithms (VWAP, TWAP, etc) it is simple to put an order into a box and transact as much stock as needed.

Nowadays brokers offer research, information, and some of the larger ones offer secondaries and IPO’s and are paid via stock transactions. Though there are many times when these brokers need to generate some volume so they offer customers an incentive…in the form of free money. For example, today one of the big banks called our firm offering to sell stock way below market price. In this case, .10 to .15 cents below market price for a few 100,000 shares. It is a trivial matter for the trader to easily sell short stock at the current price and take delivery to cover the short via the transaction.

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~ by largecaptrader on June 21, 2010.

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