BGR,
I agree that no entity would try to engineer an index unless it was
to its benefit. This 'benefit' could extend beyond mere trading
profits, however.
As an outsider to Wall Street, I see much of the deal-making there
as insular. For example, Goldman Sachs is happy to include other
money-center banks as co-underwriters of IPOs, even though they
are competitors. Of course, this is done to diffuse risk, but it
is also done as an implied quid pro quo - "now, be sure to include us in that Sycamore Networks offering in October."
Also in the Wall Street circle are the institutional clients of the
money center banks. If the GE pension fund is laden with calls on
the SPX, then Morgan Stanley might show their loyalty by helping
them unload in an opportune manner. Their actions may result in a
loss on their own books, but it would simply be considered a business
expense, just as I might take one of my clients out to dinner.
But, do I believe in a concerted, conspiratorial effort to rig the
markets? No. There is too much simple human selfishness at work
in the markets for such an effort to be successful. And so I agree
that 'manipulation' cannot be a variable in a market model. If or
when it occurs, it seems to occur for different reasons than at
other times, and thus is indistinguisable from noise.
AA |
