# Market Manipulation: What the hell is going on?



## basilio (9 May 2013)

*  Who is manipulating share prices on the stock market - in particular LINC ENERGY ?*

It has been a very crazy, frustrating ride with LNC over the past few years ? Many people have voiced concerns about systemic short selling and conflicts of interest with large financial institutions. Along the way investors have lost not only their fingers but arms legs and everything in between.

One particular investor has taken the trouble to investigate and document what has happened with LNC shares from 2010 - 2013. Its a long read but IMO well worth the time. Far more significantly however it opens the question of market manipulation and the role that ASIC or other financial institutions should take to ensure transparency in the marketplace.

The researcher does not focus solely on LNC. If you followed CUDECO with much frustration in the past few years you can check out the analysis on that share

 Where do we go to from here ?
http://www.scribd.com/doc/139929124/...inc-Energy-LNC


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## Trembling Hand (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*

LOL. 

So three percent of the outstanding being short is Manipulation?


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## basilio (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*



Trembling Hand said:


> LOL.
> 
> So three percent of the outstanding being short is Manipulation?




You didn't actually read any part of that analysis did you ? 

There is much to digest in it but one of the key points is that after short sellers have managed to drive the SP down on the open market they appear to re purchase/make good the short sales by buying the shares from related companies off market.


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## Trembling Hand (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*



basilio said:


> You didn't actually read any part of that analysis did you ?
> 
> There is much to digest in it but one of the key points is that after short sellers have managed to drive the SP down on the open market they appear to re purchase/make good the short sales by buying the shares from related companies off market.




I read 5 pages about the short sales section. All rubbish. But I'll get back to it in a few hours and rip it to bits if you like,

Got the feeling its not going to matter much though....


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## tech/a (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*



basilio said:


> You didn't actually read any part of that analysis did you ?
> 
> There is much to digest in it but one of the key points is that after short sellers have managed to drive the SP down on the open market they appear to re purchase/make good the short sales by buying the shares from related companies off market.




One of the major reasons I trade technically.

I don't get involved in pages and pages of reports and rhetoric.
I don't have to work out what's fair and what's not.
Who's screwing who and why they're doing it.

If its trading in my direction then I'm on it.
If its not I'm off.

Long term/short term it doesn't matter.
If my money isn't in something that's moving in my direction it doesn't stay their long.
Takes 20 mins a day tops
Unless I'm day trading the FTSE/DAX.
Then its an hr or so.

Cant see why you'd trade any other way?


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## sinner (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*

Having read the article I'm a little confused (your link in this thread doesn't work like it does in the LNC thread btw). Basically it accuses big fish of cartel pricing this asset. Doesn't that actually imply the share price of LNC never reflects some sort of underlying, fundamentally derived value? Otherwise how come the LNC board did not start buying up shares en masse when they claimed to the ASX that they were "significantly undervalued"? If the share price was 50% undervalued at one point, did the board really believe they could achieve better than a 50% return by not purchasing the share?

Basically, what I'm asking is "assuming you're correct on this, why was true value not arbitraged into by insiders?"

Secondly, this chart says plenty to me, not sure I can see obvious signs of manipulation...




Who are the guys writing these reports, and why am I even listening to them? Just a gmail address to trust?


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## CanOz (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*

Well its obvious to me Sinner....They're manipulating the entire Energy sector...


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## basilio (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*

Are we on the same page here folks ?

I'm totally surprised Trembling hand at your outright dismissal of the paper after reading the 5 pages of introduction. Obviously the rest of the paper details the evidence behind the allegations of market manipulation but the allegations made are quite striking.

In essence the writer is saying that major trading houses are  buying and selling stock between themselves to drive the SP up and down. I would have thought that was unambiguously immoral if not illegal. 

In particular the capacity to drive down the SP through short selling on the open market *and then repurchase the shorted shares through an associated entity off market * is so suss it screams out for inquiry.

And Sinner I tried the link again and it appears to be functioning properly. ?


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## Boggo (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*



basilio said:


> There is much to digest in it but one of the key points is that after short sellers have managed to drive the SP down on the open market they appear to re purchase/make good the short sales by buying the shares from related companies off market.




Sounds like good business to me, wish I could do it. Are you implying that it is illegal or are you peed off that the share price doesn't match all those touchy feely numbers that are extracted from reports based on what happened three months ago.




tech/a said:


> One of the major reasons I trade technically.
> 
> I don't get involved in pages and pages of reports and rhetoric.
> I don't have to work out what's fair and what's not.
> ...




Exactly, and if the prices didn't move around then great opportunities wouldn't present themselves at regular intervals.





sinner said:


> Who are the guys writing these reports, and why am I even listening to them? Just a gmail address to trust?




Probably the same people who spend hours trying to extract various ratios based on data that is out of date and then cry foul when reality doesn't fit the theory.


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## Gringotts Bank (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*

More and more I'm sticking to the top 20 stocks, where the higher turnover and closer scrutiny is likely to ensure manipulation doesn't happen.  Outside the top 20, I reckon anything goes.  Wherever there's large amounts of money, there will be people cheating.


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## McLovin (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*



basilio said:


> There is much to digest in it but one of the key points is that after short sellers have managed to drive the SP down on the open market they appear to re purchase/make good the short sales by buying the shares from related companies off market.




To what end? Company A and company B are related parties, if B shorts a stock and after the price has fallen buys it off A, then B has made a profit and A has made a loss; the net gain for the group is 0. It's a pointless exercise. Only a fool would think that's a good business to be in.


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## sinner (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*

I am sure this thread would not exist if LNC was priced at $5 today, right? 

When basilio is talking about manipulation and it's the concern of manipulation to the *downside* that has triggered this research piece in the first place. Because you can be sure if LNC was priced at $5 everyone would be patting themselves on the back about what good investors they are.

Here is what my confusion derives from:

I am the director of a company at the moment. Due to this, I am aware of all its financial information updated on a daily basis. This is a robust company growing very quickly. The company is unlisted but if it was, and shares were selling for half off what I could see is the daily financial info, I would back the f* truck up on it, maybe even attempt to purchase a controlling interest.

If manipulation is taking place, company insiders should be able to produce significant value for shareholders (including themselves) by buying and selling shares below/above their highly informed fair value price?


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## basilio (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*

Interesting responses. I think Gringott has picked up a key point on the perceived potential of market manipulation in shares outside the top 20.

I can see how large movements in SP offer opportunities to some people to make money. Given that it generally takes  months or years to see concrete results of a business plan creating short term jumps and dips  is an excellent way to keep interest and activity in the market.

*So why don't we just start up rampers anonymous and upramp or down ramp some likely suspect ?*

Oh thats right.  That is considered illegal and well and truly jumped on by the authorities.

So for another way out why don't we  develop a murky round of  brokers and companies that can create an upwards or downwards push on particular shares and make a killing along the way. And of course if your smart like T/A or others you can pick these trends and get on and off at the right times ??

___________________________________________________________________________

The theory of a stock market is that it holds the collective savings of millions of people which are invested in the fortunes of businesses across the world. It should be based on open information (ie no insider trading) and free market forces ( no deliberate manipulation).  

The world is not perfect (or course)  so having a strong, effective body to police the markets is necessary to protect our collective interests against rampers, mis informers or crooks. 

Otherwise it could just become a giant, rigged scam


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## CanOz (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*



sinner said:


> Having read the article I'm a little confused (your link in this thread doesn't work like it does in the LNC thread btw). Basically it accuses big fish of cartel pricing this asset. Doesn't that actually imply the share price of LNC never reflects some sort of underlying, fundamentally derived value? Otherwise how come the LNC board did not start buying up shares en masse when they claimed to the ASX that they were "significantly undervalued"? If the share price was 50% undervalued at one point, did the board really believe they could achieve better than a 50% return by not purchasing the share?
> 
> Basically, what I'm asking is "assuming you're correct on this, why was true value not arbitraged into by insiders?"
> 
> ...




It seems the facts are once again pushed aside for the conspiracy theorists....

Looks reasonably correlated to me Basilio....you can see that, yes?

CanOz


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## Trembling Hand (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*



McLovin said:


> To what end? Company A and company B are related parties, if B shorts a stock and after the price has fallen buys it off A, then B has made a profit and A has made a loss; the net gain for the group is 0. It's a pointless exercise. Only a fool would think that's a good business to be in.




Basilio do you understand the above quote and why your claim is utterly nutz?


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## basilio (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*

Some good points all round.

Sinner LNC shouldn't be $5 at the moment.  But it probably shouldn't be 1.70 either *and the huge swings in the past couple of years were also unwarranted (IMO)
* The writer of the research paper is just investigating the forces that appear to  be  systemically driving the SP down. As I said the market is supposed to be between independent buyers and sellers. That doesn't seem to be the case.

With regard to insider trading. Dead right a director can't use his information to buy or sell shares ahead of what the rest of the public  knows. Otherwise its like betting on the horse race when it's over isn't it ? Great gig if you can get away with it.

McLovin  check out the paper to see how the connected parties are making out. Your interpretation is oversimplified in this case. (I probably was guilty of  presenting it too simply as well..)

http://www.scribd.com/doc/139929124/7-2-Further-Research-Into-ASX-200-Companies-Linc-Energy-LNC


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## sinner (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*



basilio said:


> Some good points all round.
> 
> Sinner LNC shouldn't be $5 at the moment.  But it probably shouldn't be 1.70 either *and the huge swings in the past couple of years were also unwarranted (IMO)*



*

Wasn't my point. Rather I was pointing out (indisputably imho) that if a cartel of instos were colluding to drive the price of LNC to $5, this thread would not exist, you would not be worried about "manipulation" in fact you'd probably be patting yourself on the back for being such a smart investor.

Attribution bias, it's a bitch.

*


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## pixel (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*

Every time someone buys a number of shares from an offer, the Market changes.
Every time someone sells a number of shares to a bidder, the Market changes.

Many of those who hold the opposing view, wanting the price to come down against the buyer or move up against the seller, will complain about Market Manipulation.
Those of us who read and interpret the events, using a chart and other T/A tools, will adjust their trading behaviour and "get on with it".

I'm with tech/a & Co. on this.


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## sinner (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*

The title of this thread should be: 

Dr Shortlove or: How I learned to stop worrying and love the manipulators


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## McLovin (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*



sinner said:


> The title of this thread should be:
> 
> Dr Shortlove or: How I learned to stop worrying and love the manipulators




Instos...plotting....


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## prawn_86 (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*



sinner said:


> The title of this thread should be:
> 
> Dr Shortlove or: How I learned to stop worrying and love the manipulators




haha gold!


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## basilio (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*

I'm puzzled with the reaction to this thread.

As far as my own position with LNC. I have been always interested in the company and a few years ago had a large shareholding.  However I became disillusioned with unrealized promises and have sold most (but not all) of my holdings.

However I have followed its progress so I was aware of its share fluctuations.

While it is true that broadly speaking LNC has followed the ASX energy trend there have been some notable anomalies that didn't make sense. I opened this thread because  the paper I found seemed to offer insights into  what had happened to LNC and perhaps many other shares. It's not sour grapes - just overall concern with market integrity.

One of the suggestions is that we should embrace the manipulators. If you can't beat them join them ? 

Maybe; but I think you would have to get up very early to stay on the winning side of these  deals. 

The big picture IMHO is that we all will lose money from these actions. our super funds will be hurt as will our personal share holdings.


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## sinner (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*



Gringotts Bank said:


> More and more I'm sticking to the top 20 stocks, where the higher turnover and closer scrutiny is likely to ensure manipulation doesn't happen.  Outside the top 20, I reckon anything goes.  *Wherever there's large amounts of money, there will be people cheating*.






Doesn't your last sentence imply that "cheating" is worse at the top of end of the ASX market than at the bottom where there is far less money? Shouldn't you therefore steer away from the ASX20 as being the most "manipulated", after all it deals with the largest amounts of money?

Fact of the matter is that there is an upper cap to "cheating" on either side of the auction, which is essentially market liquidity. Large instos cannot "cheat" in small stocks simply by virtue of the size required to turn a profit for the insto relative to the daily liquidity in the stock. 

I'd also point out that "cheating" in small stocks is far more visible than "cheating" in large stocks, if one "cartel" was running a campaign, then other large instos and HFTs would be frontrunning any systematic strategy of manipulation in no time at all.

However absolutely none of this answers the question of why LNC insiders were not buying up shares with every penny available, while telling the ASX the shares were extremely undervalued.


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## sinner (9 May 2013)

*Re: Market Manipulation. What the hell is going on ?*



> The big picture IMHO is that we all will lose money from these actions. our super funds will be hurt as will our personal share holdings.




Please explain the logic in this statement. 

Investors have a mandate for due diligence. 

If you choose to forgo that due diligence by passive systematic investing (e.g. index fund) then any losses are entirely attributable to your lack of diligence! Certainly not attributable to manipulation in a stock which makes up 0.04%  (less than half of one tenth of a percent) of the ASX300.

On the other hand, if you had completed your due diligence on LNC, invested in it because it seemed priced reasonably or for a trend, then wouldn't you purchase more if it became priced even more reasonably, or exit the position when the trend finished?

Maybe you could argue that LNCs ability to finance was reduced and cost of financing increased due to poor performance of the stock, fine, which still leaves me asking why LNC insiders were not buyers?

I have my own beef with HFT/algo trading which I've covered before on ASF, around microstructure of the market and also efficient capital allocation. Personally, I don't think "manipulation" in BBG, CDU or LNC really bothers me at all.


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## basilio (9 May 2013)

Sinner we may have some misunderstandings here.

When i was referring to the big picture losses around stock manipulation I wasn't just referring to LNC. I'm suggesting if this practice is more widespread then as a whole investors will lose money to sharp operators.

With regard to the investability of, say, LNC shares. As I mentioned I was very strong on them a few years ago and cooled off as  company committments didn't happen. That was my analysis.

But accepting that, I was still very, very surprised at the capitulation of LNC shares to levels that just didn't seem reasonable given the current known facts. When that happens of course many investors do become nervous because they suspect there is some unknown bad news. In effect they jump and crystallise losses.

I go back to my initial point. The paper I quoted went into lengthy detail on the rise and fall of LNC shares and the connection with banking houses and brokers. I still believe this bears investigation.


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## CanOz (28 August 2013)

Sprung....

Big Spoofer caught on camera....err not really a "camera"

Although i thought liquidity always dried up before data events...


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## skc (28 August 2013)

CanOz said:


> Although i thought liquidity always dried up before data events...




Saw that this morning and the article soon lost credibility to me because of this...


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## CanOz (28 August 2013)

skc said:


> Saw that this morning and the article soon lost credibility to me because of this...




Yeah, was just chatting with a well known bond trader over on the Jigsaw group and he was chuckling about it....



> [12:10:45 PM] ... And they talk about liquidity drying up before a number as being "strange". Nothing strange about it. Happens during every number because no one wants to get hung. I wonder if they've ever watched an unemployment release


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## Trembling Hand (28 August 2013)

Yep it was dumb but it will be picked up by someone and forever be true.


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