User:Vtaylor/Financial stories/Program trading, market manipulation

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How could this happen? At least some of the participants and observers who recognize the problem are themselves willing to capitalize on it, even though they know full well that it is "wrong".

  • Bernie Schaeffer – a leading professional advisor – has written an excellent piece on the manipulation of the stock market. Bernie says: “”Why do you even care?” you may ask, “Sure, concerted interference with market forces is ugly and illegal and immoral, but even if you’re right, the current operation is for a good cause.” [1]

Program trading, market manipulation

From the earliest posts in August 2004, there are references to market manipulation, and the apparent lack of S.E.C. effort to prevent practices hugely profitable to a few parties, while ensuring that all other participants have no recourse in regulation enforcement or in law.

  • Typical day - Markets open lower for perfectly legitimate reasons – record oil price which will hurt the economy, the Google IPO is floundering – and then the program traders start moving the price. This is done by simultaneous trades that absorb all the offers on hundreds of issues – “sweeping”. It shows up as high TICK readings. Just now we have seen nearly half an hour of continuous buy programs and all the indexes are in the green as a result. ... Who is buying and why? Can’t tell. Is is actual buying or just ETF arbitrage – buy the shares and sell the corresponding ETF, later delivering the shares to cover the ETF short? Or is it simply an options scam – it is expiration week and the options sellers are manipulating price so as not to pay out on puts they are short? Who knows. But with mutual fund cash levels so low, actual buying is the least likely explanation. [2]
  • Options expire today - Market has spiked from a huge program trade. +1357 TICK. [3]
  • Classic End of Month Window Dressing - You can’t tell who, but this occurs regularly at month-end and is generally believed to be the result of the funds jamming the stocks they own, to make themselves look as good as possible. No it isn’t legal, but they probably figure they won’t get caught or they simply don’t care. [4]

Securities and Exchange Commission

  • Freddie Mac (NYSE: FRE – News) today announced that it has received a “Wells Notice” from the staff of the Securities and Exchange Commission (“SEC”). The Wells Notice advises the company that the SEC staff is considering a recommendation that the SEC initiate a civil injunctive action against the company for possible violations of the federal securities laws, [5]