Trading Analysis - 14th Dec 2018


14 December 2018


After an initial hiatus the excess of Buys built up to >300K at which point the SP started to move up. Despite a couple of significant Sells on the way up (145K and 95K) the SP has moved fairly freely up to >41p.

I can see two scenarios with respect to the existing c. 10M MM short position 

1. The short position has been closed by significant Sells from a tame seller, that are yet to be published

2. A second Market Maker is squeezing the first one that is currently running the 10M short position.

In all of this any external shorters who were foolish enough to sell into/create the SP weakness of the start of the weak, will have been well and truly crunched.


The rise to 41.5p earlier was subsequently followed by a further increase to 42.25p. This has subsequently retraced and Sells have dried up once again. Looks like the MM's may have to try harder to get shares, with an outstanding excess of >1.5M more Buys than Sells.

End of Day

Numerous LSE board posters commented on the rather obvious attempts to walk the share price down in the last half hour - was this in response to day traders selling, or before they sold? The trades reported after hours tell an interesting, but altogether different story:

These trades are shown in the graph below, the clear Sells (A&B) highlighted in green as 'significant sells' in both diagrams.

Once the labels are applied you can see how this set of 4 trades hang together - 2 Buys totalling 450,000 shares and 2 Sells totalling nearly 483,000 shares. It is striking how both of the Buys take place above the advertised Ask at the time, but also well above the real trading band at each time.

I believe that the Buys were placed earlier in the day and the MMs simply held these on their books until such a time as they were able to move the price down and sting a tame seller at a price 1-2 pence less than they got for their Buys. The Sells A&B would have been the below the advertised Bid had it not been arbitrarily dropped from 40p to 39p 14 minutes before the end of trading. No other Sells in this period were priced less than 40p.

The average cost of the Buys was 40.951p whilst the average cost of the Sells was 39.677p - the resulting market distortion netted the MMs involved a total of GBP 5,733 but the precise quantum of the profit motive is not the point - it is 1) the willful distortion of the market 2) the undermining of the MM's duty to the Buyer(s) to get the best price possible and 3) the undermining of the MM's duty to the Seller(s) to the get the best price possible. All of these things are unacceptable and may turn out to be illegal.

Interestingly trade D is explicitly reported by the London Stock Exchange as a duplicate pair (though not on, suggesting that it is not just a single rogue MM that is involved in these trades, but multiple MM's:

The other interesting feature, of course is that the end of day nett trade position ends with an excess of 1.84M more Buys than Sells. There is still no evidence of the accumulated Market Makers nett short exposure being reduced, and this now stands at a total of over 11.5M:

Notice how in the last 4 weeks the Nett short position has increased strongly around the times of the spikes downwards in the share price - first around the 20th/21st November and then in the last week. The drops are, I believe, due to short selling - this only does temporary damage to the share price, which recovers following strong buying, but only if MM's sell PI shares that they do not yet have - this repeatedly increases the MM's short position to where it is now.

The recently increasing rate of growth of this short exposure might be taken as greater confidence by the MM's in their ability to close their short at a profit. The question, as always, is when will this behaviour, no doubt backed by a tame seller behind the scenes, end - because at that point the SP will appreciate rapidly. For the moment though the share sale remains on.

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