Imagine you want to buy a large block of shares in a particular company, but you don't want your order to dramatically impact the market price by placing it on the regular exchange. This is where off-market transactions come in.
Off-Market transactions are also known as Negotiated Deals (NDM) Transactions or OTC (Over the Counter) transactions.
On the Pakistan Stock Exchange (PSX), Off-Market (NDM) transactions refer to trades in listed companies that are:
Negotiated Privately: Unlike trades executed through the automated trading system where prices are determined by open bids and offers, NDM transactions are agreed upon directly between two parties. This typically involves two PSX registered securities brokers acting on behalf of their clients, or even between clients themselves with broker facilitation.
Executed Outside the Regular Exchange System: These deals don't go through the standard PSX trading terminals that the public sees.
Formally Reported to the PSX: Despite being "off-market," the PSX mandates that all NDM transactions must be reported through a dedicated interface. This ensures transparency and helps maintain market integrity.
Settled by NCCPL: The National Clearing Company of Pakistan Limited (NCCPL) handles the clearing and settlement of these NDM trades, often on a "trade-for-trade" basis, meaning each transaction is settled individually rather than being netted against other positions.
Think of it this way:
The regular market is like a bustling public auction where everyone can see the bids and offers. The Negotiated Deal Market is more like a private sale where the buyer and seller agree on a price beforehand, and then officially register the sale with the market authorities.
Why Should You Track PSX Off-Market Transactions?
While they may seem less direct than regular market trades, PSX NDM transactions offer invaluable insights for astute investors. Here's why you should be paying attention:
Unveiling Large Institutional Activity ("Smart Money" Moves):
Block Trades: NDM is the preferred route for large block trades by institutional investors, corporate entities, or high-net-worth individuals. These players often have deep insights into a company's fundamentals and future prospects.
Strategic Shifts: A significant off-market purchase or sale by a major player can signal a change in their strategic outlook for a company or even an industry. Are they accumulating shares in anticipation of growth, or offloading due to concerns?
Gauging True Liquidity and Market Depth:
Hidden Volume: PSX NDM transactions represent real buying and selling activity that doesn't appear in the regular market's daily volume figures. By tracking these, you get a more accurate understanding of the total demand or supply for a particular stock.
Impact on Price Discovery: While NDM deals don't directly move the regular market price, the negotiated price can sometimes provide a unique valuation reference, especially for less liquid stocks or during periods of market uncertainty.
Understanding Shareholding Structure Changes:
Promoter Activity: Transfers between promoters, strategic investors, or within family groups are often conducted via NDM. These can have long-term implications for corporate governance, control, and future business decisions.
Potential for Future Moves: A large accumulation of shares by a new investor via NDM might precede a public announcement or a change in company strategy.
Identifying Potential Catalysts or Red Flags:
Confidence Signals: Consistent large-scale buying in NDM can be a strong vote of confidence in a company, suggesting that well-informed parties see significant upside.
Warning Signs: Conversely, substantial off-market selling, especially at a discount to the market price, could indicate that insiders or large investors are losing confidence, potentially signaling future challenges.
Minimizing Market Impact:
For the transacting parties, NDM helps execute large orders without causing significant price volatility on the main board. This means the market might not immediately react to a major transfer, giving observant investors an edge to analyze and react before the broader market.
How to Track NDM Transactions?
While NDM transactions are not part of the live trading feed, the PSX ensures they are reported. StockIntel provides a dedicated tool for tracking and downloading PX Off Market Transactions (PSX NDM Transactions).