Heinz, you are 100% correct, it is definitely manipulation. Unfortunately, under the not-so-watchful eye of the NASD, it is illegal only for the "foot soldiers," the generals are freely permitted to paint early and often.
About 10 years ago, a guy I was working with at a wirehouse had clients with a very large position in a stock that was bid 2 7/8, offer 3 1/8. All of it was heavily margined. If the last trade landed on 2 7/8, his clients got mindboggling margin calls...if it landed on 3 or 3 1/8 he was OK. So for a couple of weeks, he'd drop a buy ticket (for his personal account--not a customer's) for 100 shares right on the close. Someone blew the whistle on him...at the NASD hearing, he freely admitted what he had done, and said he was acting in his clients' best interest (saving them from margin calls). The 100 share purchases didn't effect the bid or offer (it was a pretty liquid stock), they just made the final print. So in essence, his actions did not hurt anyone nor did they materially effect the market in the stock. The NASD suspended him for 6 months and fined him $25,000--calling it "market manipulation."
Point being, if a retail broker can get suspended and fined ($25,000 was a lot of money to this kid, he was not a big producer) for dropping 100 share buy tickets, then where is the NASD when the fund managers actually move bids and offers with their tape painting? We both know the answer... |
