A to B share ratio

[backtothebeach]

The A to B share ratio, historically slightly above 1500, has recently stayed around 1515 to 1520, but has risen to 1550-1560 currently.

 

There may be a good reason for this, but I kind of suspect that it is demand from Japan that is pushing the A shares up temporarily.

 

Interesting pair trade if you are comfortable with the risk of the spread widening even further.

Edited April 14, 2023 by backtothebeach

[backtothebeach]

Thinking about it further, maybe the Sōgō shōsha are like: if this guy can buy 7.4% of us, over time we’re going to buy the same amount of his company. Keiretsu thinking.
 

A keiretsu (Japanese: 系列, literally system, series, grouping of enterprises, order of succession) is a set of companies with interlocking business relationships and shareholdings that have dominated the Japanese economy since the second half of the 20th century

[gfp]

You may be right about it being Japanese buying that is pushing up the A-shares the last couple of days, but I don't think those companies are going to come up with the cash to buy 7.4% of Berkshire any time soon.  They range in market cap from like $25 Billion USD to like $55 Billion (Mitsubishi Corp.)

[backtothebeach]

27 minutes ago, gfp said:

You may be right about it being Japanese buying that is pushing up the A-shares the last couple of days, but I don't think those companies are going to come up with the cash to buy 7.4% of Berkshire any time soon.  They range in market cap from like $25 Billion USD to like $55 Billion (Mitsubishi Corp.)

Oh, didn’t realize how “small” they are. I think it is still likely that they will purchase a position in Berkshire, maybe 1 -2% between the five of them.

[backtothebeach]

The ratio seems to be shrinking.

 

Does anyone know the mechanics of how the market for A shares is made? The bid ask spread is huge.

 

What’s weird is, that if I put a buy order above the current bid, my limit becomes the new bid, and there is actually trades going through at precisely my limit, but mine is not getting filled. What’s going on?

[longterminvestor]

who is the broker you are placing the order?

 

[backtothebeach]

IB

[backtothebeach]

Closed the arbitrage trade. Put on at an A to B ratio of 1553, closed at 1528, so I picked up (the $ value of) 25 BRKB shares in the process. I'm pretty sure the ratio will drop to below 1520 fairly soon, but trying to not be too greedy and have the trade on for too long on margin.

 

This time I used a hidden order in the middle between bid and ask to buy back the A share, and it got filled after a minute.

Edited April 20, 2023 by backtothebeach

[backtothebeach]

On 4/17/2023 at 10:05 PM, longterminvestor said:

who is the broker you are placing the order?

 

I asked at IB what is going on:

 

Example (without decimals for simplicity): Bid-ask is 493000 - 495000

I submit limit order to sell 1 share at 494900

The bid-ask immediately changes to
493000 - 494900

In the next minute or so several shares are traded at 494900, but my order is not filled.

Someone is jumping ahead of my order, even though I submitted it first.

Thank you for any information about how BRK-A orders are handled by IB or the exchange.

 

IB's reply:

Dear Mr. xxx,

According to our records during time frame of submitting Sell BRK A orders, there transactions marked as FINRA -ADF executions.

Executions reported as “D” FINRA-ADF are trades between one Broker Dealer and another Broker-Dealer not on a listed exchange. You can not direct route an order to "Finra-ADF". The executions are reported to comply with Finra's trade reporting requirements. These are reported to Time and Sales as completed trades and IB customer orders can not participate in these completed executions. The requirement is that they must be reported within the Bid/Ask at the time unless the order has been granted an exemption.

Kind regards,

[aws]

Most of the time when you see a trade on the tape for an A share it's not actually a full share trading. Fractional shares, so as little as $1.00 value, show up the same as a full share order. 

[thepupil]

for whatever reason, I wasn't able to do this trade at Fidelity. Fidelity didn't allow me to borrow A shares. I didn't try at Interactive Brokers because my parents fidelity account was only one i deemed suitable large for the trade. 

[backtothebeach]

On 4/20/2023 at 11:03 AM, aws said:

Most of the time when you see a trade on the tape for an A share it's not actually a full share trading. Fractional shares, so as little as $1.00 value, show up the same as a full share order. 

Thanks, that seems more likely than IB's explanation. Or maybe it's both.

 

Last Friday you had the bid-ask as wide as 495000-499000, and trades going through at both bid and ask within seconds. Makes sense that it is fractional shares, otherwise whoever is making this market would pick up thousands of dollars every round trip between bid and ask.

Edited May 5, 2023 by backtothebeach

[backtothebeach]

The ratio is now back to 1518. I made a few more of these trades when the ratio spiked, netting another 6 B shares or so. Left a lot of money on the table… it just feels really uncomfortable being short an A share even though it is hedged with long 1500 B shares.

[backtothebeach]

A to B ratio spiked again to ~1535 today.

[backtothebeach]

On 12/11/2023 at 5:55 PM, backtothebeach said:

A to B ratio spiked again to ~1535 today.

The ratio dropped back to the low 1520s on Friday. Now, if I could only time my arb trades as well as these posts.