18th Aug Flash Short – Update Week 7


21 March 2018

Monday 2nd Oct 2017

The day started with RNS’s making a director declaration and announcing the change of Nominated Advisor – however these clearly had very little affect on the market – trading was very quiet all day with the total volume only reaching 274K shares.

Despite the balance of trading being strongly in favour of Sells the Bid continued to rise throughout the day – again it seemed that MMs wished to buy more than the minimal 209K they were able to get their hands on. The day finished with a nett trade position of -144K shares (i.e. 144K more ‘Sells’ than ‘Buys’.)

The after hours RNS describing the proposal to demerge the Tin resources as Afritin proved to be much more interesting to the LSE community – this had been carefully suggested by Fortune before but now there was a firm proposal for a company meeting on the 20th October to vote on the proposals to float Afritin before the end of November 2017.

The SP ended at 9.375p, flat on a volume of 0.27M (65K Buys vs 209K Sells).

Tuesday 3rd Oct 2017

The previous day’s Afritin RNS caused a lot of discussion on the LSE board – mainly on the distinction between the registration date for the 20th Oct vote (10am on the 18th Oct) and the demerger record date (6pm on the Business Day prior to the anticipated date of Admission of Afritin) which would be the date upon which registered BMN shareholders would be eligible for 1 share in Afritin for every share they hold in BMN.

As is often the case after announcements like this there was a flurry of buying first thing on Tuesday morning – on reflection given the discussion described above the Monday afternoon announcement gave many shareholders the time to read and understand the RNS. The Bid and prices paid for Buys rose quickly early on, with 9.75p being paid by half past eight. Buys outweighed Sells by more than 0.5M by this time, although subsequent disclosures by LTHs on the LSE board revealed that more than 300K of these Buys were undertaken as T20 trades – so it is quite possible that Market Makers may feel that they can go short against those trades.

There was little selling in the rest of the day to offset the strong early buying, so the nett trade position finished at more than +450K, with Buys being more than 79% of the surprisingly low trading volume of only 778K shares.

The SP ended at 9.5p, up 1.2% on the day on a volume of 0.78M (614K Buys vs 163K Sells).

Wednesday 4th Oct 2017

Wednesday appeared relatively quiet, compared with Tuesday, if the number of sells is considered, however the share trading volume was actually higher (0.88M versus Tuesday’s 0.78M). Apart from curiously identical 10,759 sized, and 9.41p priced, trades at 11:31AM and 12:04AM there was little of note during the day apart from a large 292K sized trade at 3:35PM which increased the nett trade balance to more than +360K. Despite an after hours sell of 50K further buying in the afternoon resulted in the nett share trading position ending the day at +415K. Another day when any MM short position had not been reduced.

On the following day there were strange trades of volume 540,541 reported – initially as a negative (i.e. trade reversal) early on and then at the end of business the trade that they were reversing. As these had no nett effect on the Wednesday trading behaviour these have been ignored for the purposes of this analysis.

The SP ended at 9.5p, flat on the day on a volume of 0.88M (649K Buys vs 229K Sells).

Thursday 5th Oct 2017

Thursday was quiet again – a trickle of Buys, including one of 200K at 9.57p around midday, offset by around the same volume of sells, all in the incredibly tight price band of 9.45-9.46 pence.

The SP ended at 9.5p, flat on the day on a volume of 0.67M (358K Buys vs 315K Sells).

Friday 6th Oct 2017

The business of trying to close the estimated Market Makers short position of around 2M shares continued on Friday, with the Bid edging up during the day – necessary to allow any short Market Maker to buy the shares that they have been needing for the last couple of weeks. Evidently the slow trading, and excess of buying in previous days did not encourage them so they were forced to pay 9.5p for half a million shares at just past 9AM. The nett trade position of around -500K stayed approximately constant until the end of the day when again someone was forced to pay 9.5p to Buy another 100K shares.

The SP ended at 9.5p, flat on the day on a volume of 1.1M (220K Buys vs 893K Sells).

Summary for Week 6

SP Change TBP estimated Buys – Sells Potential Shorting Activity Comments
Monday 2-10-17 Flat – 144,194
Tuesday 3-10-17 + 1.2% +450,487
Wednesday 4-10-17 Flat +420,503
Thursday 5-10-17 Flat + 43,707
Friday 6-10-17 Flat – 672,434
Total + 1.2% +0.09M


The Monday announcement of the Greenhills/Tin assets demerger as Afritin was clearly seen as positive by shareholders, after some initial confusion about the details and operation of the demerger. This resulted in a spike of buying on tuesday and wednesday which set back the Market Makers who it would appear have been in the position of trying to close their short position for the last couple of weeks.

 Week after 18th Aug Short TBP estimated Buys – Sells
Week 1 – 0.36 M
Week 2 + 1.2 M
Week 3 + 3.6 M
Week 4 + 0.76 M
Week 5 – 1.36 M
Week 6  – 1.90 M
Week 7 + 0.09M

At the end of the week any Market Makers short position was no closer to being closed – in fact it may be 90K shares larger.  Whilst the table above shows the basic weekly position growing it is instructive to show the nett trade position and SP graphically as a function of date.

Above you can see how the market makers were somehow able to sell more shares (i.e. PI Buys) than they bought (i.e. PI Sells) in the first two weeks of September (Weeks 2 & 3 in the table) when the SP was high. How could they do this ? Because they assumed that with the spurt in buying over, they would be able to buy these shares in the subsequent 2-3 weeks. As you can see the nett trading position moved consistently into negative territory in the last two weeks of september (Weeks 4 & 5) as they endeavoured to buy in the shares they needed to close their short position – and of course this has been attempted at prices lower than the 9.75p+ that was paid in weeks 2 and 3.

The accumulated nett trading position for the market makers is shown in the graph below – as you can see the flow of positive news this week has not diminished the overall nett short position of approx 1M shares.

Should a Market Maker be taking a short position as suggested then we can assume that they would hope that they could close their positions by buying from PIs. However if they cannot do this and the short Market Maker is having to close their short by buying from another Market Maker then they may simply be passing that short position on – i.e. kicking the can to another MM.

In our analysis when we have seen something that appears to be a sell (i.e. below our Accumulation-Distribution Line) then we have characterised this as a PI Sell to a Market Maker and have reduced the accumulated Market Maker nett trade position accordingly (the Yellow curve above). However if the real situation is that MM1 is simply transferring the short position to MM2 then the overall MM short position has not actually changed as a result of this simply recycling activity – thus the true Yellow curve may well lie above the one shown above – our curve shown represents the minimum possible estimate for MM short position (it might be much higher). You might consider that those trades, such as Friday’s 500K and 100K that occur at exactly the Bid-Ask midprice would be prime candidates for such a MM1-MM2 share transfer. If this is the case then the true Market Maker short position will be closer to, and possibly a lot greater than, 2M shares.

This article only conveys the personal opinion of the author. Whilst every effort is made to ensure the content is accurate, we cannot guarantee the accuracy of the data shown. This article does not constitute professional, financial or investment advice and must not be used as a basis for making investment decisions.

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