Artificial Unintelligence – Why we see a lot of one share trades

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Hi good folk – Just wondering why so many one share trades go through the market and how could it be possible to make money out of it? Eg. Afterpay (APT) this afternoon – so many. Long term member. Yours Jim


Hello Jim – A lot of institutional (large) orders are now being managed by computers which replaces the need for human dealers to watch the market all day. The computers are given parameters for the orders they are asked to operate/execute. One of the common parameters is that the computer can only do x% of the volume traded at any point during that day – it is designed to stop it smashing a price. If you didn’t have any parameters it could just smash the price down with the whole order straight away. So they have to be told to go slowly.

So if the computer is only allowed to do say 10% of the volume of the day and they have an order to sell (or buy) 100,000 shares then they need at least 1,000,000 shares to trade in total that day to complete the order. So if 100,000 shares trade in the first hour they can sell (or buy) 10,000. Then when another 100,000 trade in the next hour they can sell another 10,000. And so on. So they do this incrementally all day until the order is complete.

This means that if another ten shares trade they sell one share. So what happens is that when say ten computers are operating orders at the same time in the same stock one computer sells a share which allows another computer to sell a share which allows another computer to sell a share which allows another computer to sell a share and on it goes. In an illiquid stock like APT the parameters are set like this, sensitively, incrementally, because even a small order could smash the price – so the computer “fiddles” rather than operates the order and this is the result… computers dealing with each other in tiny amounts. Of course humans wouldn’t bother, but computers aren’t human. It’s called AU – Artificial Unintelligence. It’s how Skynet got started. I hope that makes sense.

Source: Marcus Today (13/2/2019)