Post by fastwalker on Mar 31, 2005 18:21:44 GMT -5
Look before you leap is sage advice for anyone and especially stock investors poised to snap up shares of a hot stock, if an inexplicable boost in the price and volume of a company's stock in the absence of good news occurs, it may actually may be the work of a stock manipulator who drives up the price and then profits by selling the artificially inflated shares
I have been around computers and the internet for a long time. While I have always enjoyed both, the markets have more of a fascination for me, I enjoy watching the “announcement” of bad guys being caught and see the "incredible games" they played. In the current market place, these games are played by market makers, brokers, traders and many other individuals and or various groups and to that end, I wanted to voice some thoughts on these activities as perpetrated by the "big players," who eventually get caught, charged and paid huge fines many times for stock market manipulation and those who get away..
If many manipulators are engaged in deceptive practices, average traders seeking valid information about a firm’s prospects and the true value of its stock may be driven out of the market, thereby reducing its efficiency. Although it’s too late to help those who lost money on Enron, Worldcom or Tyco, there are lessons to be learned. Stocks involved in litigation with the Securities and Exchange Commission over stock-market manipulation from 1990 to 2001, have as analysis and modeling shown, occur in small, illiquid markets, such as the OTC Bulletin Board and the Pink Sheets, which have much lower disclosure requirements for listed firms and less stringent securities regulations.
“Stock Market Manipulation at these levels often includes corporate insiders, brokers, underwriters, large shareholders and market makers as the more likely suspect stock manipulators. The reason, these individuals are close to the information loop, so it is easier for them to pose as informed parties who have knowledge about the future value of stocks.
Sound like anyone we have recently become aware of?
The most common type of manipulation is inflating the stock price through wash trades and the use of nominee accounts (owned by essentially the same individual or group). The increased trading volume and price often attract the attention of investors or information-seekers. Some manipulators also gain unfair advantage by spreading false information through stock promoters, news releases, SEC filings and Internet chat rooms and bulletin boards to encourage other information-seeking investors to purchase shares.
The more information-seekers who can be drawn in, and the greater the market’s uncertainty about the true value of the stock, the higher the manipulator’s returns are likely to be, the researchers say. Manipulation also increases stock volatility, with stock prices rising throughout the manipulation period and then falling afterward.
Government regulators must play a strong role in discouraging manipulation while encouraging greater competition for information.
In reality, there are so many “Big players” that go uncaught, it’s impossible to determine if the action of enforcement is viable? That is to say, is it viable without a truly concerted effort to “identify and prosecute the bad guy?
Despite the SEC's claims of tough enforcement, its actions suggest it is content mostly with press releases, the theory being that enforcement in a few high-profile cases will deter future acts by many potential defrauders at all levels and not just the standard "pump and dump" schemes For example, on the Eve of Christmas in December of 1997, when all was quiet on Wall Street, Nasdaq market makers quietly agreed to pay a $1 billion fine to settle a class action suite that investors brought against them.
So please don't delude yourself into thinking that everything that goes on in the markets is what it really looks like! Or that bringing a grass roots pressure to bear on “perceived” bad guys will impact the illegality of stock manipulation. Many times when reviewing the basis for charges of stock manipulation, you will see words that sound like they came out a of a 1940’s pulp fiction novel, "Collusion," "gouging," "extortion," you name it!
more...
I have been around computers and the internet for a long time. While I have always enjoyed both, the markets have more of a fascination for me, I enjoy watching the “announcement” of bad guys being caught and see the "incredible games" they played. In the current market place, these games are played by market makers, brokers, traders and many other individuals and or various groups and to that end, I wanted to voice some thoughts on these activities as perpetrated by the "big players," who eventually get caught, charged and paid huge fines many times for stock market manipulation and those who get away..
If many manipulators are engaged in deceptive practices, average traders seeking valid information about a firm’s prospects and the true value of its stock may be driven out of the market, thereby reducing its efficiency. Although it’s too late to help those who lost money on Enron, Worldcom or Tyco, there are lessons to be learned. Stocks involved in litigation with the Securities and Exchange Commission over stock-market manipulation from 1990 to 2001, have as analysis and modeling shown, occur in small, illiquid markets, such as the OTC Bulletin Board and the Pink Sheets, which have much lower disclosure requirements for listed firms and less stringent securities regulations.
“Stock Market Manipulation at these levels often includes corporate insiders, brokers, underwriters, large shareholders and market makers as the more likely suspect stock manipulators. The reason, these individuals are close to the information loop, so it is easier for them to pose as informed parties who have knowledge about the future value of stocks.
Sound like anyone we have recently become aware of?
The most common type of manipulation is inflating the stock price through wash trades and the use of nominee accounts (owned by essentially the same individual or group). The increased trading volume and price often attract the attention of investors or information-seekers. Some manipulators also gain unfair advantage by spreading false information through stock promoters, news releases, SEC filings and Internet chat rooms and bulletin boards to encourage other information-seeking investors to purchase shares.
The more information-seekers who can be drawn in, and the greater the market’s uncertainty about the true value of the stock, the higher the manipulator’s returns are likely to be, the researchers say. Manipulation also increases stock volatility, with stock prices rising throughout the manipulation period and then falling afterward.
Government regulators must play a strong role in discouraging manipulation while encouraging greater competition for information.
In reality, there are so many “Big players” that go uncaught, it’s impossible to determine if the action of enforcement is viable? That is to say, is it viable without a truly concerted effort to “identify and prosecute the bad guy?
Despite the SEC's claims of tough enforcement, its actions suggest it is content mostly with press releases, the theory being that enforcement in a few high-profile cases will deter future acts by many potential defrauders at all levels and not just the standard "pump and dump" schemes For example, on the Eve of Christmas in December of 1997, when all was quiet on Wall Street, Nasdaq market makers quietly agreed to pay a $1 billion fine to settle a class action suite that investors brought against them.
So please don't delude yourself into thinking that everything that goes on in the markets is what it really looks like! Or that bringing a grass roots pressure to bear on “perceived” bad guys will impact the illegality of stock manipulation. Many times when reviewing the basis for charges of stock manipulation, you will see words that sound like they came out a of a 1940’s pulp fiction novel, "Collusion," "gouging," "extortion," you name it!
more...
