NYSE probing end-of-day trades
Thu 11 November, 2004 19:49
By Brendan Intindola
NEW YORK, Nov 11 (Reuters) - The New York Stock Exchange's top regulators said on Thursday they are investigating brokerage firms that send in trades in the last seconds of the day in order to manipulate the price of shares at the closing bell.
Richard Ketchum, the NYSE's top regulator since March, said these bursts of heavy trade are partly the result of increased hedge-fund trading. Adding to the problem, he said, are index-related trading strategies and apparent price guarantees that brokers make to their trading clients.
"Firms need to understand that it is not OK, no matter what the risk or guarantees to customers, to come in and blow the market apart in the last five seconds," Ketchum told the Reuters Finance Summit in New York.
"You don't have to be a rocket scientist to understand that if you save most of your trading -- after having traded some earlier -- for the last 10 or 15 seconds," he said. "You are likely going to impact the closing price and impact the profitability of the position you took."
Large sell orders at the end of the trading day can lower the final price of stock, while heavy buying just before the 4 p.m. closing bell can lift prices. If the stocks are major elements of an index, the final value of the index can be influenced.
Susan Merrill, one of Ketchum's top lieutenants at the NYSE's recently beefed-up regulation division, said the exchange was on the lookout for manipulation.
"In the cases that are under investigation, if we think that they purposely manipulated the market with the intent to close at a certain price for their own financial benefit, we will bring those cases," Merrill said.
They declined to name the firms under investigation. |
