Pushing Share Prices Down

[Lucstar]

I know this may be a stupid or obvious question? But what methods are there to deliberately push a share price down? Is it simply a matter or loading yourself up with your target share and selling out immediately for dirt cheap?

[GreatPig]

Lucstar,

I have to ask: what would be a motive for wanting to do this?

GP

[clowboy]

while it can be done (and am sure it sometimes is) dont get cuaght doing it or you will end up in court against the likes of ASIC

[Lucstar]

Hmm, i didn't know losing money was illegal. I was just curious becuase as some of you may know from my previous thread, i am watching a very interesting tv drama series, which revolves around the stockmarket. Interestingly in a particularly chapter, two millionaires battle it out on the market. One opponent discovers what stock the other is purchasing and therefore deliberately pushes the prices down, but of course this practice came at a huge cost.

[Lucstar]

I thought only deliberately releasing false information was illegal.

[clowboy]

to the best of my knowledge, deliberatly manipulating a share price is illegal.

I could be wrong, have been in the past, will be in the future.

While it would seem that doing so at ones own loss is of no real gain, if it forced a stock into a downward trend (for no other reason than someone dumping alot of stock) it could provide the oportunity to then purchase the stock at a heavilly discounted price and then reap the benifiets.

Of course we would be talking large volumes and a huge initail loss but who knows.

just a mumble opinion.

[Lucstar]

Yes, but what if the dumping of one's stock was such huge volume that it manages to severely damage the confidence of the stock? Would that put the stock into a downtrend for a while?

[GreatPig]

Lucstar,

I think ASIC would take a dim view of anything that appeared to be manipulating the price, possibly halting trading in the stock until they'd investigated.

The rules are pretty strict about price manipulation, as they are with insider trading. For example, as a director or senior executive, you have to be careful about buying or selling shares in your company too close before market announcements, otherwise it could be deemed to be insider trading if the price changed significantly just after the announcement. It looks pretty dodgy when a director sells a pile of shares then the next day releases a profit warning to the exchange (yes, yes, I know... he didn't sell them, his wife did, and she of course knew nothing about the company business :rolleyes: ).

GP

[SJT]

Section 1041A of the Corporations Act prohibits creating an artificial price for trading in financial products. I know this because it's a question in my assignment.

[still_in_school]

Hi Guys,

honestly you see this all the time, on live market data depths...

you see the price yo-yo up and down, pretty much doing nothing at all, but also you will see the great pump and dump game, or even the battle of the U bids...

there are so many names for this...

* defense defense
* battle of the U bids
* yo-yo playing
* pumps and dumps

but the funniest i like to watch is, when you see someone trying to place a U bid on BHP or NCP, and the sellers just knock out that bid within seconds... in a smaller stock, that might be a speed bump, but in the larger blue chip stocks, they run over it like its a flat road... with no give way or stop sign...

Cheers,
sis

[Lucstar]

That is a good point sis, dont we see this all the time?
Btw sis or someone: could you explain to me what are battle of the U bids?
Cheers

[stefan]

could you explain to me what are battle of the U bids?
A U bid is an undisclosed bid for which we don't know the real size. Brokers can enter u bids when an order is bigger than $100'000. The battle of the u bids relates to the strategy used by brokers to make a stock look stronger/weaker than it really is by putting in a u bid on either side of the market. If you see a u bid on the buy side, you would think that somebody is trying to buy massive amount of shares at a certain price. This will suggest confidence in the stock and therefore will bring in more buyers. However, these bids tend to disappear quickly shortly before the market price is reaching the U bid level. It turns out to be a fake bid that was placed there by a broker just to inflate the buying/selling pressure.

It's a nasty game, but you can spot those bids as they normally tend to be just one tick above or below the current market price. They go away once the level is reached only to turn up once again below the current level.

In a quick moving market, such bids can be extremly dangerous as the broker may not have enough time to remove his fake bid and ending up with lots of shares he didn't really want in the first place.


Happy trading

Stefan

[Lucstar]

So would you call that manipulating the share price?

[still_in_school]

Hi Lucstar,

very well explained by Stefan (thanks), it is market manipulation, and on smaller stocks... it can have great effect in moving the price around, just be weary when you see a U bid...

but in such stocks like the big BHP, NCP, its only a speedbump... no real market effect...

Cheers,
sis

[stefan]

So would you call that manipulating the share price?If I was to buy a majority in MUL (which is only about 700'000'000 shares anyway ;) ), I probably wouldn't want anybody to know so I'd advice my broker to put in a U bid while buying all 700'000'000 shares at the current level. The rest of the market wouldn't have any idea what's going on until my order becomes less than $100'000 in size. by that time I've already bought most of my shares anyway.

If on the other hand I'd have put my order in the usual way, the market would have thought: MAN! There must be something in the bush. We better get into it as long as we can. The price would run away and I'd never get my 700Million shares at a decent price.

So if you see a U bid for MUL, it could be me planning a take over. :D

On a more serious note this shows what U bids are about and why they have an impact on the market. Speculation and rumors are part of it and that's why a U bid tends to influence the price. I wouldn't say it has a major impact and as SIS said, it is of limited use. However, as shown in my example, it can be a serious tool for a big investor to hide his intentions at least for a while.


Happy trading

Stefan

[tech/a]

Hmmm.

An interesting discussion about a myth!

After all I have been nominated as Authenticator of Myths.

While it is a common misconception that this occures ASIC would be all over it like a bad case of heat rash.

Brokers like their liciences.

Try it yourselves and see what reaction you get.


tech

[Lucstar]

"So if you see a U bid for MUL, it could be me planning a take over" Stefan

Firstly, would like to thank everyone for such insightful explanations. Also i'm interested to know, would a take over benifit or harm a company. Originally, i was quite positive that a take over of a company would be very bad news for shareholders. However, reading through some of your posts, i start to have doubts. So whats the story there??

[stefan]

An interesting discussion about a myth! After all I have been nominated as Authenticator of Myths.I'm sorry to say that this is not a myth. It is actually happening almost every day. As you may be aware by now, I was closely following MUL for some time and this is just one of the stocks where you can see it happening. U bid a tick below current bid, changing again once the price comes down or vanishing completely shortly before it would have been hit. Not to mention that this will be ever so hard to proof for ASIC as a broker can easily claim that his client changed his mind. You would need to monitor it closely and there simply aren't any ressources left to do that.

Tech, clearly this is illegal but it happens. No myth. After all, you only have to follow what's going on in the market (which I have no doubt you do extensively) to see that illegal things are happening every day and cheats are getting away with it easily. ASIC is only half as powerful as you would like to believe and before they start an investigation, lots of things already had to go wrong over a long period of time.


After all I have been nominated as Authenticator of Myths. There is a difference between myth and turning a blind eye on things. ASIC is weak, short of staff and they themselves have mentioned it many times: They can only focus on the most important issues. A few u bids on a penny stock won't wake up their interest.

It is time to realise that traders are not at all that protected as some of us may want to believe. I see lots of postings about ASIC will do this, ASIC will do that. Fact is, ASIC hardly ever does anything unless the damage is so big and so many people lost their savings that it simply can't ignore it any longer. Very, very rarely do you see ASIC taking a pro active approach. You can't blame them. There are just too many sharks out there to protect all the beaches ;)

Happy trading

Stefan

[Lucstar]

So, placing U bids aren't illegal, but the way people use it to their advantage is? Am i correct?

[stefan]

So, placing U bids aren't illegal, but the way people use it to their advantage is? Am i correct?Yes, you're correct. U bids are prefectly legal.

Happy trading

Stefan

[tech/a]

When you log in a bid to sell or buy with an ONLINE broker once you hit Submit then all is recorded.So your "U" bidders have an electronic trail.

Now ASIC havent and wont take any action as there isnt ANY market manipulation-----------simply it doesnt work----------if it did they would take action---------Just ask Rivkin if they are toothless.

Secondly Full service brokers--------unless you want "Tosser" tattooed in your forehead from your broker that I wouldnt think youd even ask!

The myth is firmly in place.

There is no market manipulation by using "U" bids.
ASIC concurs.

[stefan]

tech,

This will go nowhere. you believe it doesn't exist, I believe it does. Whether it is a myth or not is impossible to proof. I can't ask Rivkin about ASIC but I can keep an eye on what's happening and you would have to be blind or willing to turn a blind eye on things if you happily believe that the market is paradise with ASIC on constant watch, catching whoever is doing something wrong.

ASIC have their glorious moments every so often. But they nevertheless aren't able to follow it all. It's of no use to have a record of a U bid somewhere. There are hundreds of them. It's perfectly legal to enter a U bid and to change it as many times as you like. Proofing that its purpose is to manipulate the market would be rather tricky.

Let's face it, the stockmarket is far from perfect. ASIC is no more than a traffic patrol. They will catch the odd offender but they can never watch them all.

Happy trading

Stefan

[Mofra]

Its not just Undisclosed orders (U boats) that manipulate price.

Countless market openings (predominantly on small caps) you will see dummy bidders place large orders that push the open price up a tick or two, only to see it disappear just prior to market open. It seems to be a fairly common practice but on a daily basis you can see bids moved up trying to jump the queue - people get caught every day.

Of course, the longer your term the less important intra day moves become ;)

Cheers

[tech/a]

So dies the placement of an undisclosed bid in a buy or sell que influence you or any one else in your trading?

Particularly when the non genuine bids disappear as you say from the line up once hit.

Simply my arguement is that they have no influence.
As such they dont manipulate the market--------thats your view that they do.

Anyway Im fine with you think they are successful and I dont.

[stefan]

tech,

the bid itself does not have that much of an influence. But countless examples have shown that once they appear, the market shows a reaction. I'm not saying it will initiate a 50% run, but it does increase the bid size considerably. You've mentioned it in your other thread: Too many people try to find the bottom. Now because there are so many out there, once a U bid appears, traders looking for that bottom do get the impression that the volume is strong and they will finally buy. (We both agree that this is a rather stupid behaviour, but since 97% of traders aren't successful, I'm not surprised it happens. It's the classic "go with the crowd" thing.)

Happy trading

Stefan

[Mofra]

tech,

Try logging onto the commsec chatsite and wait until a u-boat appears on a smaller cap share. By the paniced discussion I would say it certainly has some effect - an experienced trader with a MT or LT entry bid would ignore it, but there is quite a bit of inexperience trying to make fortunes in smaller companies.

[markrmau]

Just my interpretation, but when the pro's really want to ditch stock, they continually put on parcels of stock on the market, and not do a /u. I have seen this with AGL after the AGM, and yesterday/today with WBC. The parcels were generally 10,000 sized, for share prices of about $13 and $18.5 respectively (which would have qualified for /u).

[still_in_school]

Hi Guys,

in a way, also trading, is like playing Chess with the market...

anyone want to Check Mate? :)

Cheers,
sis