Selling a big share holding
Discussion
I'm not an expert, but I'll try to explain anyway...
In order to sell anything, you need to find a buyer first - so that short answer is the money that the bank receives comes from the people that buy the shares. However, this could be rather cumbersome in practice so there is a system of brokers to improve market liquidity.
Each listed company has one or more brokers, and these brokers are obliged to buy/sell a number of shares called the Normal Market Share (NMS) which is listed in the annual reports of each company. (Typically a FTSE 100 company might have an NMS of 200,000 or so). The broker sets the price that they are willing to pay/accept for any amount of shares upto the NMS and these are bid/offer prices which are quoted in newspapers or on the internet. If a broker is holding more shares than the NMS, they will have to drop prices to encourage people to buy shares from them. If they are not holding enough shares, then they will increase the price to get people to sell shares to them. For large transactions, the bank would have their own broker, who would be trying to off load the shares into the market at the highest price.
Andy.
In order to sell anything, you need to find a buyer first - so that short answer is the money that the bank receives comes from the people that buy the shares. However, this could be rather cumbersome in practice so there is a system of brokers to improve market liquidity.
Each listed company has one or more brokers, and these brokers are obliged to buy/sell a number of shares called the Normal Market Share (NMS) which is listed in the annual reports of each company. (Typically a FTSE 100 company might have an NMS of 200,000 or so). The broker sets the price that they are willing to pay/accept for any amount of shares upto the NMS and these are bid/offer prices which are quoted in newspapers or on the internet. If a broker is holding more shares than the NMS, they will have to drop prices to encourage people to buy shares from them. If they are not holding enough shares, then they will increase the price to get people to sell shares to them. For large transactions, the bank would have their own broker, who would be trying to off load the shares into the market at the highest price.
Andy.
Various different ways of doing this (it's my job to advise companies/shareholders on this). The main ones might include
1. Dump the block on the market - price goes down instantly, by the time your order has been matched in the market you could have lost a fair bit
2. Work the order over a few hours/days/weeks so the volumes you're trading are sub-market levels, price stays stable
3. Block Trade - invite several banks to give you firm bids for the stock
4. Accelerated/marketed placing - place the stock in a few hours via a lead managing bank
5. Derivatives to hedge the risk and/or spread disposals over time
There are several ways of structuring each option, complicating any decision.
1. Dump the block on the market - price goes down instantly, by the time your order has been matched in the market you could have lost a fair bit
2. Work the order over a few hours/days/weeks so the volumes you're trading are sub-market levels, price stays stable
3. Block Trade - invite several banks to give you firm bids for the stock
4. Accelerated/marketed placing - place the stock in a few hours via a lead managing bank
5. Derivatives to hedge the risk and/or spread disposals over time
There are several ways of structuring each option, complicating any decision.
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