I thought I’d share this microstructure example I have been following intraday, as it highlights how useful our TradeShaper alerts are for illiquid stocks. I actually hadn’t heard of Areva before today (despite its €3.5 billion mkt cap it typically only trades 98k shares a day), but it’s involved in mining uranium and designing/constructing nuclear reactors, as well as renewable energy development. The stock is up 17% MTD after EDF put in a bid for Areva’s nuclear reactor business arm. Pretty cool stuff, although I digress…let’s focus on the microstructure.
Alerted to unusual liquidity on the order book at 10:53 am…
…ta da, very visible sellers (ask liquidity 32x what we would expect on a Tuesday at 10:53, to be more specific). Now given the fact the stock is underperforming the basket, there is loads of liquidity on offer and the spread is within its normal range you could argue buyers have an (adequate) reason to transact. However, don’t forget SELLERS HAVE JUST MASSIVELY LOADED THE OFFER. Personally I’d be more than happy to sit on the bid and let the sellers come to me, but they do call me “Captain Hindsight”.
Wow, it looks like that is exactly what happened, albeit it took more than 2 hours for sellers to get bored and start hitting bids. Talk about cost savings if you had gotten this alert, the stock has moved 212 bps. Sellers could have gone on risk to their broker given this information and buyers could have been very passive indeed.
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