Price Manipulation

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hailoh

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Post Number: 193
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Wednesday, December 13, 2006 - 03:21 pm:

GTG is a biotech stock with a commanding shareholding by its founder and CEO. There were a series of about 9 trades each of 215 shares today from about 2.30 pm until close. I have feeling this general subject has been answered elsewhere on the forum but I can't locate it. Any idea what the strategy behind this type of trading might be?

I am holding CFDs in the back drawer because it is the sort of stock that bursts out the blocks very so often, and it has an "end of Stage 1" look about it..

GTG Weekly

dug

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Wednesday, December 13, 2006 - 03:38 pm:

Algorithmic Trading,hailoh,we call it Algae for short.In Short Term,the MAINthread of MBP,metabolic something,towards the end there's a bit of a write up or you can put in Algoetc into Google and find it.
That's what it IS,hailoh not piffle about Institutions keeping up with the slight moves in their Index Funds or anything else dreamed up by Dills.
Algorithmic Trading,it's come to a share dear to you.

Happy Trading,
jr

Dig for the sake of it.

hailoh

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Wednesday, December 13, 2006 - 05:44 pm:

Thanks Dug, found it. Whew, tough going though.

I'm fascinated by what algorithmic trading is trying to achieve. With GTG, at end of day there were 5 buyers for 89456, 2 sellers offering 53030. I have a feeling the 50000 was placed after 4.00pm.

The nine 215 trades plus another couple around 268 were at 36c. Two trades amounting to 3227 at 35.5c went through after 4.00pm.

Supposing the 50000 was responsible for the algorithmic trades and it succeeded in enticing enough of the 5 to go to 36c instead of 35.5c. The difference would be $250 less costs. I don't know how brokerage treats small trades like that (maybe the 50000 had to go on to avoid brokerage on the bait) but it seems like a lot of huffing to try to get not much puff.

Still, if it were repeated over a large enough number of stocks it might not turn out to be such a bad day's work after all(mainly for the brokers of course).

Live and hope you're learning!

captain_chaza

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Wednesday, December 13, 2006 - 06:11 pm:

Ahoy Sea-Cadet Hailoh

The Oceans/Markets are Efficient
Only a Mad-Dog could assume you could move markets with a series of a few $small bets

Many have tried over the ages with really "BIG" money and all have failed
Crikey!
What chance do you really think a few miniscule "algae" trades have in shaping the seas and weather conditions of any market?

Salute and Bon Voyage
Capn

"While we stop and think, we often miss our opportunity." Publilius Syrus, 1st century B.C.

"I believe the future is only the past again, entered through another gate."
Sir Arthur Wing Pinero 1893

"There are two times in a man's life when he should not speculate: When he can't afford it, and when he can." Mark Twain, 1897

dug

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Wednesday, December 13, 2006 - 07:43 pm:

Hailoh,
The point of Algae Trading is to maximise sales[or buys] without disrupting the Depth."They" don't pay brokerage like you or I."They" are beyond worrying about Brokerage,"They" can make No Cost Ploys!!
So that is what 'Legitimizes' them to,say,ASIC."They" are a force against AGAINST volatility.
Now I've identified that this IS what those small parcels are all about.
I've also stated how this can be used as an Indicator.To see what ONE BigBoy is doing.
I'm currently pondering how to use d'Fact of Algae Trading by d'BIG can be done by us peasants to OUR advantage but
Hailoh,
You have to ditch ALL feelings that Algae is a PLOT!!
It's wholly Legit.Allowed,friend so then you move on to "subverting d'Dominant Paridigm",making the New Whizz Bang work for you,YOU!!!
so,well,bear with me or better yet give us ya thoughts.
cheers,
jr
ps-chuck?bug off!!

Dig for the sake of it.

redback

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Wednesday, December 13, 2006 - 08:17 pm:

G'Day Dug
Long time no speak.
Correct me if I'm wrong but what you are saying sounds very much like cross trading to me which of course is illegal. I have also studied market depth in full for months on end until it became just non purpose and just stuck to the simply trading terms and have never looked back.

Anyway just thought I would clear this with you if I say too much I will as normal just get shot down in flames.

Happy trading

ingot54

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Wednesday, December 13, 2006 - 11:44 pm:

What you describe is AOP - Automated Order Processing - and is described in my second link below. The other name for it is Automated Client Order Processing or ACOP.

It is worth following up every one of the following links.

I have done a lot of research on this, and have several emails in response to my queries to the ASX.

What stands out to me is their outright denial that robotic trading was occurring - they played dumb with me until I was able to send them a screen shot of the course of sales. I questioned whether the buy/sell participants in these orders were in fact the same operator/broker!

Of course they are the same operator - but they use different computers to place the robotic (algorhythmic) buy and sell orders, so that the IP address does not match for identification.

After presenting my findings to the ASX they then admitted what is happening. Algorhythmic has been a part of their policy since 2005, and the first link proves the "why" and "how" of the demand for it by clients.

To keep this shorter than it might end up, algorhythmic trading is the process whereby electronic software submits small orders at highly strategic times, (and may at the same time place unusually large dummy bids/offers in the buy/sell queues) in order to artificially inflate or deflate the price of a certain stock.

In other words the robotic trader can step up the price or step it down, simply by placing a small order at a highly strategic moment.

"Wash" trades (buying and selling to yourself) is illegal, as seen by the ASX and ASIC proceedings against Nomura a few years ago. But this "bot" (robotic) trading sails very close to the wind - one step away from "wash" trades in my view. Legal, but ...

"Bot" trades have happened to PDN and SMM recently.

Now for the links - if you wish to know what is happening, look at each one thoroughly.

http://www.asx.com.au/about/pdf/announcement_open_briefing_050729.pdf

http://www.asx.com.au/supervision/rules_guidance/asxl/asx_gn01_prevention_of_man ipulative_trading_transactions.PDF

Pages 3 and 4 are interesting in this link:
http://www.asx.com.au/supervision/rules_guidance/asxl/asx_gn22_automated_order_p rocessing_operational_requirements.pdf

This link gives a list of ASX trading rules:
http://www.asx.com.au/supervision/rules_guidance/market_rules.htm

This link is interesting in that it outlines the rules of Section 13:4 - "Prevention of Manipulative Trading". The ASX has these provisions in place, but relies on the rules being self-enforcing - there is very little anyone could do to prove manipulation - even course of sales data could be disputed.
http://www.asx.com.au/supervision/rules_guidance/asxl/asx_section_13.pdf

The above links should be at least browsed to get an idea of what this is about.

But look at page 15 of the document below - the ASX has dealt with heaps of manipulation - we are just not informed of it.

I would suggest that every complaint we make IS investigated, and I am certain action does result from our complaints, where genuine.

http://www.sirca.org.au/news/seminars/0409_slides.pdf

Further research below:

http://www.sirca.org.au/news/seminars/0409_paper.pdf

If you are unhappy about being left out in the cold on this, please voice your complaints to the ASX complaints dept.

I will be very happy if you do - might add weight to my own bleatings to them, and that of a few others I know on other forums.

Keep Smiling

Trading style: CFD's predominantly long term.

ingot54

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Wednesday, December 13, 2006 - 11:54 pm:

At the risk of being boorish, I post the course of trades for SMM on 16th November 2006.

As you can see, these "bot" (robotic) trades had the scene almost to themselves.

The figure on the right side of the column is the number of shares traded. I am not saying this is manipulation (in this case) but the huge number of tiny trades is proof of bot activity - and is becoming more frequent.

The whole point is this: If it is convenience, why not have the shares bought as a bloc?

If it is not for convenience then what is the motive and what is the benefit? For whom?

11/16/06 12:38:00 2.30 2.30 2.30 100
11/16/06 12:43:11 2.30 2.29 2.30 300
11/16/06 12:44:16 2.30 2.29 2.30 300
11/16/06 12:46:28 2.30 2.29 2.30 10
11/16/06 12:47:32 2.30 2.29 2.30 300
11/16/06 12:50:49 2.30 2.29 2.30 300
11/16/06 12:54:05 2.30 2.29 2.30 300
11/16/06 12:57:18 2.30 2.29 2.30 300
11/16/06 12:59:27 2.30 2.29 2.30 300
11/16/06 13:00:49 2.30 2.29 2.30 2000
11/16/06 13:05:21 2.30 2.29 2.30 4300
11/16/06 13:06:26 2.30 2.29 2.30 300
11/16/06 13:08:37 2.30 2.29 2.30 300
11/16/06 13:12:08 2.30 2.29 2.30 300
11/16/06 13:15:42 2.30 2.29 2.30 300
11/16/06 13:16:45 2.29 2.29 2.30 5000
11/16/06 13:17:49 2.30 2.29 2.30 300
11/16/06 13:20:45 2.30 2.29 2.30 300
11/16/06 13:24:00 2.30 2.29 2.30 200
11/16/06 13:27:18 2.30 2.29 2.30 12749
11/16/06 13:30:36 2.30 2.29 2.30 200
11/16/06 13:33:51 2.30 2.29 2.30 200
11/16/06 13:37:04 2.30 2.29 2.30 200
11/16/06 13:39:16 2.30 2.29 2.30 200
11/16/06 13:42:32 2.30 2.29 2.30 200
11/16/06 13:43:40 2.30 2.30 2.31 2610
11/16/06 13:46:52 2.31 2.30 2.31 200
11/16/06 13:50:07 2.31 2.30 2.31 300
11/16/06 13:52:16 2.31 2.31 2.31 400
11/16/06 13:55:32 2.30 2.30 2.30 15840
11/16/06 13:57:54 2.30 2.30 2.30 3070
11/16/06 13:58:58 2.30 2.30 2.30 7730
11/16/06 14:08:58 2.30 2.30 2.30 2200
11/16/06 14:11:38 2.30 2.30 2.30 2500
11/16/06 14:12:00 2.30 2.30 2.30 300
11/16/06 14:29:05 2.32 2.31 2.33 22546
11/16/06 14:33:42 2.33 2.32 2.33 500
11/16/06 14:35:55 2.33 2.32 2.35 3337
11/16/06 14:44:33 2.34 2.33 2.34 700
11/16/06 14:47:48 2.34 2.33 2.34 700
11/16/06 14:48:54 2.35 2.33 2.35 2000
11/16/06 14:57:37 2.34 2.33 2.34 3600
11/16/06 15:01:55 2.34 2.33 2.34 700
11/16/06 15:05:19 2.34 2.33 2.34 500
11/16/06 15:06:22 2.34 2.34 2.35 614

Keep Smiling

Trading style: CFD's predominantly long term.

ingot54

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Thursday, December 14, 2006 - 12:02 am:

Further links:

http://www.iress.com.au/support/ITS_Conversion.pdf

This one is 1.2 Mb - you might want to skip it - it is a thesis submitted in 2002 regarding AOP systems.
http://www.financeit.unsw.edu.au/docs/yunkiThesis.pdf

This one too is a lengthy discussion paper, and is almost 1 Mb (109 pages) so unless you are really getting into this, you might skip it too:
http://portal.ecu.edu.au/adt-public/adt-ECU2006.0016/02chapter1_4%20Gharavi.pdf

Keep Smiling

Trading style: CFD's predominantly long term.

ingot54

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Thursday, December 14, 2006 - 12:26 am:

Here's my final post for the night! And probably more interesting than my others. It's a copy/paste from a newsletter - from www.investmentu.com
*************************************

Dear Reader,

There's a reason the average pay of Goldman Sachs' 24,000 employees - from secretaries and assistants to CEOs - was a mind-boggling $520,000 last year.

The company is a profit-making machine!

This year, Goldman Sachs will rake in between $30 and $35 billion in revenue.

That's enough to hand all 300 million men, women and children in America a crisp $100 bill - and still have a billion or two to spare...

But here's what most investors don't understand...

Goldman Sachs didn't become the financial powerhouse it is by collecting fees and commissions from investors like you and me...

Nor did the bulk of its profits come from underwriting such high profile public offerings as MasterCard and Bank of China.

No sir...

Private, 'Behind-the-Scenes' Trading

The lion's share of Goldman Sachs' profit - nearly two-thirds of it - comes from its own private account trading.

In fact, the company is on track to generate roughly $22 billion in revenue this year by successfully doing what every trader strives to do: Buy an investment at one price - and sell it for a better price hours or days later.

(Goldman Sachs') primary source of profit has shifted from banking to trading, and the firm is intentionally quite vague about how, and precisely where, those trades are made or, equally relevant, from whom the profits are coming.

The Economist, April 27, 2006

And Goldman Sachs isn't the only one racking up huge gains from 'behind-the-scenes' trading...

Lehman Brothers, Deutsche Bank, and Bear Stearns also recently reported that private trading accounted for more than 50% of their profits.

Now here's the billion-dollar question:

How are these trading firms able to generate such obscene profits so easily, so predictably... so matter-of-factly - while even the best fund managers seem to struggle to make a profit in this market?

Despite what you may think, there's no secret team of stock-picking whiz kids.

There's no Buffett-like guru at the helm.

In fact, the men and women behind these huge profits aren't stock experts at all.

'Mechanized' Trading

Instead, they're the country's top mathematicians, computer scientists and software engineers who have developed highly sophisticated computerized algorithmic trading systems, which quite literally can 'see' into the market's future.

These super computers leave nothing to chance.

No hunches or guesswork.

Human logic and emotion are completely removed from the process.

They take millions of pieces of market data that have occurred minutes, hours and days prior... analyze them... and then 'predict' - with extraordinary accuracy - where the price of a stock, ETF or commodity will go next.

It's a technique called 'quantitative algorithmic analysis'... which, simply put, is a process that states: 'if A, B and C occur, then D is the likely result'.

Meteorologists have been using this technique for decades to predict the future movements of hurricanes and storms. They take data collected from the storm, combined with inch-by-inch, minute-by minute movement history and other weather variables, then feed it into the latest super computers loaded with sophisticated algorithmic software...

Within seconds, the computer spits out the storm's most likely path, the speed at which it's likely to move... and the strength it's most likely to reach. That's how weather forecasters can know with such a high degree of certainty where a storm's heading - and how so many lives can be saved through warnings and evacuations.

But in the financial world, this technology doesn't save lives...

It makes people with access to it fantastically rich.

It's almost like having an automatic money machine... just turn on the switch and let the profits fill up the room.

$30 Billion in Profits -
As Effortlessly as 'Flipping a Switch'

In fact, when the top five trading firms 'flipped the switch' last year, they were able to quietly extract upwards of $30 billion in trading profits from the markets with stealth-like precision...

That's over $82 million in profits... every day of the year!

Of course, you or I don't have direct access to Goldman Sachs, Lehman Brothers or any other trading firms' proprietary systems. They're reserved for their own trading... and maybe a handful of billion-dollar clients...
*************************
Well - that level playing field just got terribly lop-sided! You may be wondering, "Where did that $30 billion come from?" The answer is: From you. And from me. When you get stopped out of a trade. When the trade suddenly turns against you soon after entry ... and any other scenario you could name whereby you lost a few dollars.

You put it down to "normal" market activity, and resolve to pay closer attention to your entry timing.

But unless you can think at the speed of a computer, you may be just a few nanoseconds too slow in this new trading arena. Computers programmed to react as soon as "normal" traders place their orders are no longer the science fiction of HG Wells, or George Orwell.

No, Big Brother is here and now.

Get used to it.

Get over it.

Or trade derivatives!

Keep Smiling

Trading style: CFD's predominantly long term.

hailoh

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Thursday, December 14, 2006 - 08:23 am:

Thanks Ingot54 and other contributors. I am getting the picture.

Ingot, in the case of SMM this series of trades preceded a rise in price that carried through during the following two weeks. It will be interesting to follow GTG.

Hilarius both now and in his prior incarnation sought the holy grail for ages without much success. It seems that it does exist after all, but in the shape of a package of maths living behind a screen.

ingot54

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Thursday, December 14, 2006 - 11:43 am: