Trading on the unlisted market

In essence trading on the unlisted market is the same as trading on the NZX, with the key differences being 1. you need to sign a disclaimer acknowledging that the unlisted market is not a registered exchange; and 2. general levels of liquidity are lower, so transactions can be hard to get through.

In detail 

Opening an account

You first of all need to open an account with a broker that deals on the unlisted market, this list can be found here. If you already do business with one of those brokers then you should contact them for more details, otherwise you’ll need to contact them and request to open an account – which involves the usual array of forms and proof of ID, as well as the acknowledgement/disclaimer:

“In recognition of the unregistered nature of the Unlisted trading platform and the participating Issuers, anyone trading shares in Unlisted Issuers will be required by their broker to sign an Investor Information and Disclaimer form before their first order is placed. This confirms that the investor recognises that Unlisted is an unregistered facility and that the obligations for Issuers on Unlisted are different to those applying to issuers whose shares are traded on a registered market or exchange.” *

Selecting stocks

The same ideas apply however it may be a good idea to check on trading activity for the company you’re interested in first – has it traded recently? Some stocks haven’t traded for a month or so, thus when you go to buy there may not even be any sell orders.

Another consideration is the lack of data and information, the relaxed regulations that make listing on the unlisted market more desirable for companies in terms of compliance costs may mean that the quality of investor relations activity will vary. Information can come out quite sporadically, thankfully though we’re seeking to track down more information and will publish it on the website in the reports as it becomes available, a list of company reports can be found at the home page. Also of use is the tables & ranking section, which compiles some key stats and ratios from the reports, which makes it easier to compare company financials and identify strong businesses.

Liquidity issues

When you go to place a trade you will probably look on the quote sheet to see what the price is, you should also note the previous trading activity in terms of volume and price history to feed into your overall decision. When it comes time to pull the trigger however, you will ideally need to find a company that has at least one sell order, and either buy at their offer price or place a bid close but lower than their order to try pull them down. 

Otherwise you’ll just have to put a buy order to market and fish for sellers, this requires a careful balance of patience and willingness to move the price higher: patience is required in that you can just put your order to the market and wait and wait until someone decides to sell, or you can move the price up until someone is enticed to sell. Obviously you don’t want to pay any more than you have to – the lower the entry price the higher the total return, but of course waiting has risks – things could change e.g. company announcements. Liquidity is the major obstacle or ‘cost’, but if you’re patient and intelligent about it you can get around the issue, of course the problem will be less significant if you stick to the more active securities.

Order book transparency issue:
Order matching Orders are matched in standard price then time priority with one exception: Brokers receive time priority for any orders that match with an existing order they have in the market for that stock (this supports the efficiency of internal settlement for 'crossings' between buying and selling clients within a broking firm). *

Final thoughts

By Callum Thomas

Brokerage rates

Broker	% rate	minimum rate
Direct Broking	0.8%	$30
ASB Securities	0.8%	$60
ABN Amro Craigs	2% (first 5k)	$60 (+$7.50)

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