Interesting article on MMs from RB, sorry if it was already posted here:
By: 101Dahlias
Reply To: None
Tuesday, 13 Jun 2000 at 2:50 PM EDT
Post # of 1093
Secret Phone Tapes Reveal Market Maker Contempt For Investors
otcnn.com
By Jack Burney
06/13/2000 09:52 AM CST
(This is the third in a series of articles about secret market maker
manipulation of OTCBB stock prices, and the need for a rule to require full
disclosure of short positions in OTCBB stocks. If you know of such instances
of MM suppression of stocks, please tell us the story at jburney@otcnn.com)
Listen to the way your friendly neighborhood Market Maker sneaks around
behind the scenes to steal your money.
These are excerpts from a SEC investigation. In the first recorded
conversation, one market maker asked another to move his bid up to create
a>higher inside bid in order to foster a false impression of increased
demand:
Trader 1: Hello.
Trader 2: Can you go 1/2 bid in the (nickname) stock?
Trader 1: (name of stock)?
Trader 2: Yeah.
Trader 1: I'm up.
Trader 2: I'm trying to make a higher sale.
Trader 1: You got it.
Trader 2: Thanks.
This quote move facilitated a sale by Trader 2 to an institutional customer at a
higher price.
Another taped conversation involved a 3-way conversation. At the time, the
firm that employed Traders 1 and 3 was quoting 28 1/2 offered for the stock in
question:
Trader 1: Hi guy.
Trader 2: Hey, tell him (Trader 3) I'm paying 1/2 for 25,000 (name of stock) if
he wants to make a print. Trader 1: I'm sorry. What do you got?
Trader 2: One-half for 25,000 (name of stock) if he wants to make a print.
(Pause while Trader 3 gets on the line.)
Trader 3: What are you looking for?
Trader 2: Twenty-five.
Trader 3: Are you (expletive deleted) kidding me?
Trader 2: No. No. I got ... Listen. Listen, don't sell me anything. Move up.
Trader 3: I just (expletive deleted) plugged about six guys.
Trader 2: Did you?
Trader 3: Oh, my god.
Trader 2: Get up. Get up so I can make a higher sale at least, all right?
Trader 3: Sure.
In this scenario, Trader 2 refrained from insisting that Trader 3 honor his
quoted ask price, but instead requested that he move his firm's quotes up.
Trader 3 moved his firm's quotes up, as requested. This was intended to
facilitate sales by Trader 2 at higher prices.
A third taped conversation illustrates how market makers intended such
quote movements to mislead:
Trader 1: Hey, man. What's happening?
Trader 2: Hey, uh, this (name of stock)?
Trader 1: Yeah.
Trader 2: You don't mind jockeying around in this thing for me, do you?
Trader 1: Not at all. Do you want me to go up?
Trader 2: I'm trying to make a sale on my offering, here.
Trader 1: Let me go to the bid.
Trader 1 moved his firm's quotations so that he was bidding the inside bid
price. This was intended to assist Trader 2 to sell at a higher price.
Typically, the market maker acting as "agent" would go to the inside bid to
advertise its interest in buying stock, and go to the inside ask to sell stock.
Such an arrangement is illustrated by the fourth taped conversation:
Trader 1: Anyway, I got some (name of stock) for sale.
Trader 2: You do?
Trader 1: And I can't go down offered at 3/4's. Could you go down?
Trader 2: Absolutely, I'm . . .
Trader 1: Are you doing anything at all?
Trader 2: I'm working for you.
Trader 1: Okay.
Trader 2: I'm at 3/4's. I'm good for at least 5, right?
Trader 1: You're good for 25.
Trader 2: Okay. No, I mean, sometimes . . .
Trader 1: Right, right, no.
Trader 2: Guys want you to move and it's not - I figured you would be for a
decent size.
Trader 1: I'm the real thing.
Trader 2: I understand.
Trader 1: I'm going to follow you down, probably, but I'd like to see the stock
down some.
Trader 2: Okay.
Trader 1: Okay.
But it's not okay. The casual way in which such Market Makers sneak around
to steal money from the investors who trust them is astounding to most
investors. But what would you call it if not "stealing?"
Few investors want to believe that it is possible for such crimes to go on, but
they do go on. They are going on today. It is the routine way many Market
Makers do "business."
More on this SEC investigation of MM manipulation in subsequent stories.
Meanwhile, OTCBB investor and company complaints continue to pour in to
OTC News Network, not to mention encouragement that we continue this
series.
(Tomorrow: The strange case of Symphony Telecom International, Inc.
(OTCBB: SYMY) and how the MMs conspired to deflate it, from the viewpoint
of an investor and a trader, who is just as appalled at MMM as the investors.)
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