Forum Archive Index - December 2001

["Wedde, John" <John.Wedde@weltec.ac.nz>]

Hi Ben,
So, Depth, finally, is here.
Where can I get it? Are there any charges or strings attached to its
provision?
My "old fashioned" method of acquiring Depth was simply to phone my broker,
but not to do this too often. 
 
Not only do the brokers have Depth but they can also see which broker is
offering to buy and sell at each price.
On making a Depth enquiry this morning about Spectrum my broker told me that
ALL OF THE BIDS AND OFFERS were from one broker! I won't mention which
broker that was but it certainly, rightly or wrongly, made me wary of the
authenticity of this particular Depth information!
Nevertheless I would still be very keen to get Depth for NZSE stocks and
await keenly any advice from anybody about where I might get this on the
Net, free and without any strings attached. If it's not available on this
basis then the NZSE has, I'm afraid once more, failed to deliver to the
small retail NZ investor.
Cheers,
John Wedde

-----Original Message-----
From: Ben Dutton [mailto:bendutton@sharechat.co.nz]
Sent: Monday, 3 December 2001 19:20
To: sharechat@sharechat.co.nz
Subject: Re: [sharechat] what does it all mean??


John,
 
Viewing depth can be pretty subjective, and sometimes just darn misleading.
I'll have a stab at helping you out though.
 
Lets take the Telecom depth snapshot that you provided:
 


         BIDS            OFFERS         
         #       Volume          Price           Price           Volume  #

  <http://www.access-brokerage.co.nz/images/null.gif>   
1        2       83,881          501
<http://www.access-brokerage.co.nz/images/null.gif>     502
111,462  2       1      
  <http://www.access-brokerage.co.nz/images/null.gif>   
2        5       55,857          500
<http://www.access-brokerage.co.nz/images/null.gif>     503
10,000   1       2      
  <http://www.access-brokerage.co.nz/images/null.gif>   
3        1       20,000          499
<http://www.access-brokerage.co.nz/images/null.gif>     504
10,235   2       3      
  <http://www.access-brokerage.co.nz/images/null.gif>   
4        2       56,800          498
<http://www.access-brokerage.co.nz/images/null.gif>     505
21,000   3       4      
  <http://www.access-brokerage.co.nz/images/null.gif>   
5        1       850             495
<http://www.access-brokerage.co.nz/images/null.gif>     509
6,000    1       5      

When you took this snapshot the "Buy" and "Sell" quotes would have been
$5.01 and $5.02, respectively.
 
There were two orders wanting to buy a total of 83,881 shares at $5.01 and
there were two orders wanting to sell a total of 111,462 shares at $5.02.
 
Thus, lets say that you wanted to buy a total of 150,000 shares at $5.02
(I'm assuming you're a high roller here ;).  You would put in a limit order
but only 111,462 shares would be filled.  The buy and sell quotes would then
change to 38,538 bid at $5.02 and 10,000 on offer at $5.03 - the 38,538
would be your shares, waiting to be filled.
 
Traders like to see market depth because it gives an indication of a level
of interest in the stock.  For example, lets say you wanted to buy a large
number of shares of an illiquid stock like ITC or SPE.  You'd look at the
depth beforehand to see how many sellers there were in the market, and how
many shares you could get hold of without moving the market up (or down, if
you are selling shares).
 
However, depth has its pitfalls - traders and brokers will put in "fake"
orders to give a sense that the stock has many buyers or sellers.  For
example, in that Telecom example I might put buy orders of 500,000 at $4.99
to give an illusion that the stock is heavily supported by buyers waiting in
the wings.  But, if the stock started moving down, I'd pull the order before
it was filled.
 
Hopefully this makes sense to you John, perhaps others would like to help
explain the pitfalls of viewing market depth as well.
 
Best Regards
 
Ben Dutton
 
 


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