Insights and Market Perspectives

3 reasons to pick up the phone and trade

Author: John Christofilos

May 16, 2018

It’s rarely necessary to speak directly with a broker/dealer to get a trade done these days. In an age of growing automation, a click of the computer button usually suffices. But that doesn’t mean a conversation with them isn’t useful from time to time. Here’s three ways that traders can often benefit from picking up the phone.

Sentiment

Trading is often full of emotion, but getting a true read on the sentiment surrounding a potential buy or sell opportunity isn’t something that pops up on a computer screen. Instead, this type of “intel” can often be derived from a quick call to a broker/dealer and by paying close attention to the tone and inflection of their voice during the conversation. For instance, someone who says they are a buyer of a certain stock with a slight hesitation or without much enthusiasm gives off a completely different vibe than someone who says they are a BUYER with more energy. These types of verbal queues can be invaluable in determining just how motivated the other side of a trade might be, leading to better decision-making and price execution in the end.

Price

Bid/ask spreads are generally good indicators of a security’s up-to-the-minute market value, but this doesn’t always hold true, especially for those looking to buy and sell exchange traded funds at certain times in the trading day. This stems from the fact that an ETF’s net asset value is calculated once a day after market hours. As such, bid/ask spreads for some funds can widen substantially between the open and close, leading to periodic uncertainty about their value. This can be remedied by phoning a market maker who can calculate an ETF’s indicative net asset value (iNAV) on the fly at any point in time during the day. Even better, the market maker often has inventory to unload, making the trade that much easier.

Size

Large trades done electronically often run the risk of being filled with multiple orders at varying prices or not filled at all if limit orders are in place. One way to get around this potential aggravation is for an investor to contact directly a broker/dealer who can find someone willing to transact the other side of the trade in full. This is typically referred to as block trading and is usually associated with institutional investors wanting to purchase or sell at least 10,000 shares and/or trade $100,000 in total share value.

John Christofilos is a senior vice president and chief trading officer at AGF Investments Inc. He is a regular contributor to AGF Perspectives.

Commentaries contained herein are provided as a general source of information based on information available as of May 8, 2018 and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and the manager accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Investors are expected to obtain professional investment advice.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), Highstreet Asset Management Inc. (Highstreet), AGF Investments America Inc. (AGFA), AGF Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA). AGFA is a registered advisor in the U.S. AGFI and Highstreet are registered as portfolio managers across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF AM Asia is registered as a portfolio manager in Singapore. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

For further information, please visit AGF.com.

© 2018 AGF Management Limited. All rights reserved.

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