Are Those Sizes For Real On London SEAQ Screens?

Some International (London) Stock Exchange members are beginning to doubt the wisdom of showing large size for bid and offer quotes.

In the most active issues traded on SEAQ, dealers frequently display prices for up to 99,900 shares, even though the minimum is only 1,000.

Traders say the LSE has encouraged members to display large size, leaving them vulnerable to competitors "picking them off." About half the volume in the London market is between dealers.

During the week of October 19th, London market makers didn't immediately answer their telephones and often weren't willing to deal in the size displayed on SEAQ screens.

While the LSE is preparing to expand to one million the number of shares that can be entered into SEAQ, it is likely market makers will scale back the size of their bids and offers. Insiders say S.G. Warburg will probably lead the way.

The head trader at one British securities firm says he readily buys or sells up to 99,900 shares at the posted price for his institutional customers, but is reluctant to do the same for other broker/dealers trading for their house accounts.

"There is a difference between the business done by a firm and its clients and the deals done between two firms in the interprofessional market," he says.

Several traders predict a greater role for the LSE's block trading facility -- known as BLOX -- which operates on Autex Systems Inc.'s Trading Information System. TIS is an electronic bulletin board where buyers and sellers of large blocks can advertise bids and offers and the number of shares they wish to trade.

Unlike SEAQ, prices and sizes advertised on BLOX aren't firm. This gives a broker/dealer greater flexibility to negotiate the terms of a trade over the telephone.

BLOX differs from Autex's TIS in that LSE members must enter the price and size of completed trades into the system. In the U.S., trade entry is optional for TIS subscribers and they can choose to enter only size, not price.

Autex and the LSE are developing two software products for BLOX. One will compare the price and size of trades entered into SEAQ with those entered into BLOX, and the other will offer LSE Topic subscribers the ability to participate in BLOX.

Topic carries SEAQ along with other financial news and information services. The interface to Topic will give small and medium-sized institutions access to BLOX information on between 200 and 300 issues, says Autex president George Landgrebe.