I'm happy to say that the LSE's use of bizarre terms is alive and well. The London Stock Exchange SETS (Electronic Trading Service), I'm pleased to tell you, is full of these weird and wonderful phrases.
The basis of SETS was launched by the London Stock Exchange in 1997. It was designed to cater for FTSE 100 firms and the largest of the FTSE 250 companies. Since then the system has (as ever) undergone significant change. Here are some of the main points of the SETS system:
London Stock Exchange SETS deals go through brokers. The brokers enter buy and sell orders through an electronic order book. Market makers have no role in the transaction - thus removing an added layer of costs.
There is no minimum order size. This is very useful to the private investor. The arrival of PEPs and ISAs (both tax advantaged investment plans which effectively hold shares in a nominee type account) meant that many private investors might own a portfolio of shares but never receive annual company accounts. SETS makes it easier to purchase small holdings (many investors now own a number of shares in their tax wrapper and just one share in their own name to ensure that corporate documentation arrives).
Orders may be matched against more than one opposite
trade in the order book. The Stock Exchange Electronic Trading System
operates on a T+3 basis which means that the financial aspects must be
completed on the third working day after the trade.
Watch These Free Videos And Learn To Trade The Stock Market
London Stock Exchange SETS orders are either:
'At best' which means the trade is carried out at the best possible overall prices
'Execute and eliminate' (What a name!!) is also known as immediate execution. Any amount of an order that can be completed at a set price is done - everything else is discarded.
'Fill or kill' involves the trade being done at exactly the terms specified in the correct volume - or nothing is done at all.
'Limit' orders remain on the SETS screen. They are set for prices that are 'no worse than' and may be filled slowly over time. An expiry date (max of 90 days) prevents these orders running for too long.
It is not easy to know quite why the names of these trades are so bloodthirsty! Perhaps there was some link to the military in the person(s) that did the naming, or perhaps the person responsible played too many video games. Either way, the names do not seem overly friendly to the fabled 'widows and orphans' that ought to be avoiding risky assets.
Most private investors would never need such a service, but it is possible to hide elements of an order. Such a feature might be useful when a company or major investor is trying to purchase large blocks of stock in preparation for a takeover approach (probably hostile).
In the modern superfast connected world, (read about high frequency trading (information here) and where much of the available liquidity can be seen by most participants, some of these order types would seem outdated - at least for the private investor.
SEAQ - Stock Exchange Automated Quotation System
There are now over 1,500 listed companies whose bid and offer prices (information here) are quoted on SEAQ. SEAQ is essentially a price-information service and not a trading system. It can be accessed through a number of screen based information services. Trades are therefore carried out either by phone or online.
- prices quoted by market makers
- the number of trades reported (above £1,000 in value)
- the best bid/offer prices with upto three market makers prepared to deal
- an automatic trade execution service
As might be understood, this is a technical area of the market and as such, for relative outsiders - such as your author - it is not entirely clear what the role of SEAQ is. The role of market makers has changed significantly as technology has improved and shares can be bought and sold electronically without a presence on the 'market' floor.
It is our understanding that the role of SEAQ is in large part to provide a monopoly over orders from the general public (the public cannot simply buy or sell direct on the market themselves). However, we may have misunderstood this role - if that is the case, we apologise.
It would be fair to say that unless you plan to become a market maker or stock broker, the chances of you needing to know the above information is quite slim. Obviously, some pages and information I feel that I need to add for the sake of clarity. Apologies!
To read more about the workings of the LSE, please also visit:
Learn More About The London Stock Exchange
London Stock Exchange Information
London Stock Exchange History
London Stock Exchange - Alternative Investment Market
London Stock Exchange Liquidity
London Stock Exchange Listing Rules
London Stock Exchange Stockbrokers
London Stock Exchange Stockbroker Charges