"Cross trades"

[jazmil]

I recently read an article which mentioned cross trades, refering to trades made by a broker between customers of the same brokerage firm. I'm wondering if these cross trades are bound by the same 5% price limit as seen on the floor of the exchange. I'm asking because I heard rumours that investors bought transcorp shares from the secondary market during the last public offer at a price well below the public offer price of N7.50. Could anyone shed some light on this?

[Avocado]

I don't know of the laws pertaining to cross-trades on the NSE, but the assumption will be that they wouldn't be allowed under conditions that aren't regulated. Good regulation will mean that such trades are reported to the NSE as cross-trades, and that both parties get a fair price. Cross-trading, as you hinted, is quite well open to abuse. First, they happen for the same stock, and will almost always (though not necessarily) involve the same broker; such 'trades' are not reported and uncompetititve. Because the trades are not reported through the exhange, it's very possible that someone isn't getting the 'best' price.

Do you have a link to the article?

.

[jazmil]

It was on an investment site I stumbled accross. I'll post the link as soon as possible.

[jazmil]

Here's the link:

http://www.proshareng.com/myproshare...les.php?id=891

The site requires free registration before you can read the article though. Its entitled " The Need for Market Makers in the NSE"

[alanbow]

I have read the article and I agree with the intent of the writer.

However from my discussions with my brokers in the past, I was told that although there is a lot of "cross trade" if I may put it like that but it is actually registered in the exchange. The house that has a seller and a buyer will first satisfy people within its house before allowing any other buyer access. I think this should be stopped as advocated in the article, market makers should be introduced to the NSE activity

A typical example was when Dangote Sugar was first listed, I wanted to buy some more but my two brokers kept telling me it was not available yet there was a lot of volume being traded on the excahnge everyday. I was made to understand that it was just being done between the issuing houses until the price got to a particular level before it is made available.

The same happened iniatlly with NAHCO after the annoucement of 3 for 2 bonus, a lot of trade was within the various houses but they get recorded on the exchange however they are not made available to other houses to buy into.

[c kenneths]

What Jazmil calls 'cross trades' seems to be what we call 'cross deals'
This involves the arranged sale of a person's stock or even share certificate to another person mainly throgh the same broking house.

I have done it before and in that case I got a man who wanted cash urgently, so I collected his share certificate and we all went to my broker and he signed some stock transfer form and then I paid him cash for the shares to be transfered to my cscs account.

Note that I paid the stockbroker his charges for both ways ( sell and buy)
then the deal will be made after the certificate has been verified and his stock will then enter my cscs.

Note also that there is no price restrictions by any regulatory body,I pay him what both of us agreed for the stock(this could be higher or lower than current market price) depending on what stock it is and how available it is in the market.

This excercise can take up to 3 months before you get to see it in your cscs. And sometimes it wont work, the guy keeps collecting dividends and bonuses on the stock.