Originally Posted by
Muse
I think this post is a worthy one to unpick there was some off thread discussion on why people would lob such low sell orders in the face of high buy orders during the 15 minute pre close session leading up to the closing match / closing auction.
From the NZX: "The Closing Auction occurs at a random time 30 seconds either side of 5:00pm. Like the opening auction, the closing auction is a single price print which becomes the close of the stock on the day. The Closing Auction algorithm is exactly the same as that used in the opening auction. It will compute the price at which it can clear the greatest amount of stock, and all bids and offers at, and overlapping, this level will execute at this, single closing print price."
Probably most DIY investors here are using some sort of platform that shows a market depth with buyers ranked high to low and sellers ranked low to high, each at their respective top 10 price points. But it certainly doesn't show everything. The sell depth above only had 393k of sellers whereas 1.9m shares wound up clearing in the closing auction (but worth calling the depth in the 15 minute period can change as orders are made or amended).
I wouldn't imagine those low sellers expected to their $4.30 -4.40 a share - they were trying to get certainty that that tranche of their holding would absolutely sell in the closing match at the higher prevailing weighted close price. And then I'd imagine some had tranches of shares they were more relaxed about not moving placed at higher price points.
For most retail investors they don't need to participate in the closing match as the liquidity is there to sell at anytime in the lead up to inclusion, and indeed, sometimes at better prices as in the case of TRA/HLG (but not GTK). But I imagine that for traders who had purchased personally meaningful holdings, & were determined to sell into the closing match & wanted certainty it would transact in order limit to potential post inclusion weakness, might look to place sell orders at a lower level than they want or ultimately expect to achieve to ensure they are in overlap during the closing auction. They might not expect to get that price - but that's the risk they take when clicking the button. In theory it'll have an impact on the match price, but given the sheer volume and weight of the ETFs buying and large holders selling, might not move the dial much, but will depend on how comfortable they are with the quantum of shares needing to be purchased and what the depth is looking like.
Anyway, just some random thoughts, and in the spirit of discussion around special events like these index inclusions. Interested in other people's perspectives as each one of these is a new learning opportunity.