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Strategies & Market Trends : Waiting for the big Kahuna

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To: ratan lal who wrote (16663)	4/16/1998 1:33:00 PM
From: Oeconomicus	Read Replies (1) of 94695

Ratan, that's exactly what Morgan Stanley did (according to the NASD - wouldn't want to get sued) on the Nasdaq-100. They had program trading short positions in place, presumeably with long calls or short puts. The firm's OTC traders sold short several of the stocks with the program trading group as the buyer (the net position of the firm was unchanged by these "trades"). The trades were crossed at a price above the market and caused the opening print to be higher than it would have been without their internally crossed "trades". The opening print, as you know, is used to determine the settlement value of the index and the options associated with it. MS's option positions would settle at a higher value and then they could cover the short positions in the open market at the lower prevailing prices. If that's not manipulation, we should all just buy bank CDs. Bob PS: I hope that made sense.

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