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Technology Stocks : Altaba Inc. (formerly Yahoo)
AABA 19.630.0%Nov 6 4:00 PM EST
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To: damniseedemons who wrote (9964)4/14/1998 11:37:00 AM
From: Oeconomicus  Read Replies (1) of 27307
 
This is about a few rouge traders back in 1995. What you're talking about is a firm-wide conspiracy; a devious plot involving analysts, traders, and the salesforce). These are very different.

Sal, it was not rouge traders. It was the head of Nasdaq trading for MS and several traders/market makers. And, it was a "firm-wide conspiracy" in the sense that they were doing their manipulating (according to the NASD) for the benefit of the firm as a whole and the firm's program trading activities in particular. What they were doing was artificially creating an opening "print" on Naz 100 stocks by "trading" stock from one department's portfolio to another.

So what, you ask? NDX options are AM settlement. By inflating the opening print, the settlement value of the index is higher than it otherwise would be (sans manipulation). MS was short the stocks it is said to have manipulated. The option side of the position could have been short puts or long calls. The higher settlement value would increase the value of either position. The problem, as I see it, is that they didn't really close out the short positions at the print prices - they simply shifted the short position to another department. They profited on the options by manipulating the stocks and then profited on the stocks when they returned to the real market-determined price.

Considering the massive amounts of money involved in index options and program trading, this little band of "rouge traders" as you so quaintly refer to them got off mighty easy IMO. A million dollars for the firm and $25m per trader isn't even a slap on the wrist.

Do you really think the playing field is level?
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