HL share price improver

srcandas

First time I've hit lucky. Sold £2000 worth of Lamprell and got:

You gained £2.65
Market price104.75p Your price104.88p

Now where does market price come from?
Is this a marketing illusion?
Do other platforms offer it?

Won't get too excited as it doesn't buy even my favourite pint but equally nice to think they looked at 30 market makers - if that's what they did!

:beer:

bowlhead99

Most brokers will get you inside the quoted spread a lot of the time, depending on liquidity (size of your order compared to 'normal market size', and how many market makers are on the bid or the offer, and whether one of them has a particular appetite for stock - this is more relevant in thinly traded AIM stocks than FTSE 100 where tens of millions of pounds worth are traded daily).

I don't use HL so not sure what proportion of the time they achieve this, but it will vary by share.

You should always be able to deal at the quoted price or better as long as it's within normal market size (NMS for a given stock is set by the exchange based on average historic daily volumes). But you can often do a little bit better and sometimes you'll find you can actually buy nearer the bid than the offer price, and vice versa... The true market price for how much us retail punters want to trade is often better than the headline figures that they'd have to take from a 50k buyer.

You can see live quotes for yourself if you have a direct access system or by paying for 'level 2' data from one of the subscription services- this allows you to place orders at a fixed price with better certainty as to whether they'll be accepted, and get a sense for where the price might be going next. But even without, if you get a market quote it can be well inside the spread, unless you've asked for extended settlement terms e.g. T+10, T+20 days.

Example, yesterday I added around 1k to my LLPC shares, which have a pretty big spread of 90p-94p. I selected a buy order using Market price, (this is with TD Direct) it came up as 91.75p and gave me 15s to accept it, which I did. Even if brokers are dealing for you "at best" rather than telling you the price up front, the FSA says they owe you a duty of best execution so this probably happens more often than you notice, depending on what you're dealing in.

Today the bid/offer is still 90p/94p on LLPC but I can do the same thing and get 91.6p. And just checking, outside my ISA I could book it extended settlement to pay in 20 business days, and they'll still give me the same price for the volumes I'm looking to trade. On the sell side, I could also beat the spread at 90.5p. So for this particular stock, the spread is not really as outrageous for low volume deals at the right time of day, as it first appears from the headlines.

srcandas

bowlhead99 wrote: »

Most brokers will get you inside the quoted spread a lot of the time, ................

Very grateful for such a full explanation bowlhead. This is the first time I have had notification that the price was better than the market although it was of course the price I was offered for the 15 seconds.

In my case we are talking about 0.1% but every little helps :beer:

sabretoothtigger

The stated bid offer tends to be the extreme. The order book should contain all sorts of deals as I understand it. There are some which offer level 2 data which gives more info on this kind of thing, not just a flat price.

Selftrade does similar, they poll various prices and pick the best

Click through these in this order
http://www.nakedtrader.co.uk/offers.htm
http://uk.advfn.com/Help/what-is-level-2-data-6.html
http://www.nakedtrader.co.uk/offers.htm

bowlhead99

Yeah I would have been happy paying my £940, so to get them for £917.50 is pretty good - it covers the dealing costs at least. Plus maybe a pint to console myself when Lloyds next gets bailed out and takes some more time off paying its preference divis...

coastline

This is something I've mentioned before as I think some brokers use different market makers to obtain a price for you..
Just because a brokers charge is cheap eg £7 a transaction..it doesn't mean you are getting the best price..
I use Barclays and every time I've dealt I have a saving in the deal....they call it price improver...
They mightn't be the cheapest but I'm happy to get the general direction in my dealing...basically I wouldnt buy small lots of shares ...
I've read comparisons before and some brokers only use a handfull of market makers...thats why I'm happy with what I've got..
I'll have a search for a brokers report...see if it mentions this..

coastline

I've just checked and Barclays use 15 market makers...

http://www.money.co.uk/companies/Barclays-Stockbrokers.htm

this link suggests most brokers can achieve 3-10 prices for a stock..

http://www.77finance.co.uk/online-stock-broker-guide.html#Bank6

As posted earlier I've no idea if you can gain anything else unless you have direct access..

bowlhead99

One thing to be aware of is, which is probably obvious, if you're doing limit or stop loss orders, they are probably only using the headline bid/offer prices to decide when to take your order to the market, and are not literally polling the market every second of the day to see if they can sell above your limit price.

So if it's really important to get a particular price, which is very close to wherever it already is, you're better trying with a fill or kill order, or watching to get some quotes and requotes yourself, rather than leaving it to them, because the price may be available but the bid never officially reaches your trigger point.

But this is a complete waste of time on some stocks. Example I just tried some dummy buy orders for 100 shares of ACHL (£400m AIM company), I can buy at 99.155% of offer price, whereas with BP (£80bn FTSE company), I have to pay 99.992% of offer price - much more liquid and transparent.

srcandas

You saved £28.41
Market price 67.85p Your price 67.088p

This was the hl reported saving on a buy very late in the day - 3 mins prior to close.

That price saving is more than the buy fee and stamp duty

When I chose a platform I assumed spread would be much of a muchness. On all trades prior to this week I never observed the promotion of the saving. Perhaps the saving was there but they didn't mention it. On the last three trades each has had a saving and together they are more than the three buy fees.

Odd this was not highlighted on the "£20 iii price increase".

I for sure will take closer notice of spread in future :beer:

sabretoothtigger

10k is a small (proper) stock deal. So as you approach that realm you should start to worry about spread, you've got this right.
It is a major factor

I almost always scale into a position if I ever hold anything large at all. Its nice to have a big buy when it works your way and terrible when it doesnt. My confidence is very low and I figure if I get it right consistently I can always justify larger deals then.

This market is so uneven I distribute very widely and thinly and so the spread does not concern me so much as the timing and ability to buy more then once cheaply aka the commission cost.

I very often literally pay the spread to buy or sell. One share I own (token amount) has 16% spread, I'd love to see what magic they might work on that one

bowlhead99

srcandas wrote: »

You saved £28.41
Market price 67.85p Your price 67.088
This was the hl reported saving on a buy very late in the day - 3 mins prior to close.

Not enough demand to need you to pay the full ask at end of day... sounds great...next morning it opens at 65-67p and after the first half hour the spread tightens to 65.5-66.5... by not waiting another 38 trading minutes, you waste another round of drinks

At least, that's what happens to me. Of course if I hold off on the trade, there'll be an RNS at 7am and it opens at 80p.

I've been in stocks with 25%+ spread, say 1.3p-1.7p, but with those types of shares you can often see them being at 5p or bust next year and so the 0.2p above mid-price doesn't hurt the profits or add to the damage too much in the grand scheme of things!