Profit 1.900, penalty 50.000
The Dutch watchdog for financial markets, the AFM, strikes again.
Accent Grave has been fined for manipulating the market in the penny stock NedSense in August 2010. Daytrading shop Accent Grave earned EUR 1900 with “pump and dump” trades, and are fined with EUR 50.000.
Changing last traded
In short, the trader bought 18k of these shares at 40 cent in the opening. During the day he traded a few back and forth. In two days he made 1878 euro before costs. The problem in the eyes of the AFM is this ; he bought twice a very small amount (say, 100 shares) at the offer. So the last traded price changed.
In the view of the AFM the last traded price is the value of a stock. That’s a little old fashioned. Especially in very illiquid penny stocks the only thing matters is at what level you can get out of your position. The midprice is a better indication.
Anyway, the arguments between the AFM and Accent Grave are in this pdf (nl). See page 3 for an overview of the trades. What Accent Grave could have said was “these small trades were only executed to check for iceberg orders“.
Two years investigation
My sympathy is with the struggling modest trading shop. A fine of 50k is way out of proportion, especially for this innocent kind of manual trading. It’s not like they’re hurting the integrity of the markets. Perhaps the AFM staff should try to trade stocks for a few days, to get a grasp of the real trading world.
It has taken the AFM more than two years to end this case, and as requested by Accent Grave / Circonflexe the decision has been kept silent until this month.
first,
fine of 50k being seen as way out of proportion, afm actually spending time to uncover this scheme with profit of less than 2k, it’s old skool dutch village out there, 400k is def a fortune over there
Fuck. That’s ridiculous.
Probably someone was bored at the AFM. Ridiculous !
They need to make it serve as a warning to other firms. If the fine was similar to the profit, people would think it’s worth the risk. Have to make the fine big enough in relation to potential profit to act as an effective deterrent.
This is not manipulation, this is trading.
Accent Grave should think about becoming too-big-to-fail. Then the fines will be a few cents for every euro of profit, if they get fined at all.
if somebody understands what was this manipulative scheme exactly, did he put in lot of bids to get his offer filled?
The fines are not few cents of euro of profit, they are always illicit profits+punitive fine on top of it
The document is in dutch so i give an example from the pdf:
11:35:59 sellorder € 0,50 (1.386 shares)
and next in line sellorder € 0,574 (1.920 shares).
Accent Grave buys 1.500 shares limit € 0,574; 1386 are bougt at 0,50 and the remaining 114 shares cause the shareprice to rise to € 0,574.
AFM states that 114 shares and an investment of € 65,446
caused a rise in shareprice of 14,8% .
you are not allowed to buy offers in holland?
They repeate buying a few extra shares to get a high print, but this shouldn´t be worth a 50k fine.
you are not allowed to get a high print in holland?
The fact that it apparently was a repeat offence didn’t help.
On a separate note: blaming algorithms for market manipulation: cute!
you are not allowed to get a high print a second time in holland?
how do you mean blaming algorithms for market manipulation: cute!
who complained to afm, does anybody actually care if a 10m mkt cap company moves +/-100%?
23. Wij zien vaak transacties voorbij komen waarvan wij ons afvragen of die geen marktmanipulatie opleveren. Dan gaat het vooral om de algoritmische handel.
‘We often see transactions passing that we wonder if that do not market manipulation. Especially when it comes to algorithmic trading.’
Diming and putting orders that you want execution for are fine, giving false signal to market by filling up one side of book is market manipulation, anything else more complicated?
Having read the pdf, I cannot help but feel sorry for those daytraders. The AFM is completely obsessed with percentage moves. If a penny stock goes up by 20% – from 5 to 6 cents – that must be manipulation and deserving of the death penalty.
I cannot remember the last time (if ever) that the AFM fined someone for market manipulation/insider trading and the stock had already moved the day before some announcement. It seems that this is one of the rare cases of market abuse. Almost makes you think markets are fair by and large!
It was also interesting to read that the AFM consider iceberg orders devious/undesirable, but “unfortunately [the AFM] cannot forbid you to use them”.
people who don’t understand market/derivative prices can fall in this trap of %move, one muppet was complaining that far otm option price had jumped high %, another muppet was complaining that cfd mtm had jumped high %
usually, it’s tempting to use the % column in excel file as a red signal, it takes a little bit more brain to filter those red signals into meaningful manipulation
what’s the rationale of iceberg being devious, why would you want to tell the market that you are large order and risk market moving against you, afm doesn’t even understand that, who are they hiring?
the absolute difference apart from a % difference exist for a reason, 2k and 10m market cap are waste of taxpayers to even be investigated; overzealousness and making an eg of it without understanding the underlying dynamics puts you in the category of fanatic mullahs, no offence to islam
What I don’t understand in the market is this : I have a bid for 1000 shares in a regular stock trading at 25 euro, and get partial fills of 8, 10, 2, 20 lots etc.
Very expensive, very annoying. That is really disrupting the market.
@ 9:47: those are the AFM guys investing their life savings 🙂 bunch of sorry losers.
Is there an upper limit on how much exchange can charge you say in a month or do they charge like 1 euro per fill till infinity ?
@10:40 not sure, but it’s especially the clearing charging for every partial fill. Depending on the deal you have of course.
so the bullet algo trader clearly has got a upper ceiling and it doesn’t matter on number of fills at his end, so to be competitive you should try to cut the same deal as him?
My Dutch is really bad so i do not understand the pdf exept from his tradelist (which indeed looks suspicious).
So did the guy also entered layering Orders or did he just printed the tape?
What looks suspicious in the trade list?
Define layering order
Layering Order:
Entering one or several orders without the intention to get it filled, or with the intention to move the price.
e.g.:
SELL 10000@10.000 LIMIT ICEBERG PEAK 500
BUY 10000 @ 9.900 LIMIT
BUY 10000 @ 9.920 LIMIT
BUY 10000 @ 9.940 LIMIT
BUY 5000 @ 9.960 LIMIT
BUY 1000 @ 9.970 LIMIT
BUY 100 @ 9.980 LIMIT
BUY 100 @ 9.999 LIMIT
That is definitely forbidden an will lead to huge penalties or even jail.
Suspicious in the tradelist are these “small” buy orders. The only intention behind these orders is to make a high print.
These “small” buy orders often took out the full size at the best offer. Why blame the agressor order for the smal size then?
was the penalty for buying the offer or for filling up the bids to sell out your own inventory at the offer?
There was no layering involved here. But really, try manual layering in the real market.
Works fine, until somebody fills all your layers. Boom! yours!
obviously if you are trying to sell and put in lot of bids to get a better execution, sometimes it backfires and you end up getting even more long, no surprises there, also it’s strict no no as this is attempt at market manipulation
how did you conclude this was not the case of layering here in this case study
No layering here, as it was not in the 32 pages document. Otherwise AFM would have noticed.
so if it wasn’t layering what’s so suspicious in his trade list?
Strange moves were probably caused by AFM employees themselves. Read this:
http://www.washingtonpost.com/blogs/wonkblog/wp/2014/02/27/the-incredible-stock-picking-ability-of-sec-employees/
the article is regarding SEC employees, what does that have to do with AFM employees?
Update: The SEC says it has an explanation. “Each of the transactions was individually reviewed and approved in advance by the Ethics office,” said John Nester, spokesperson for the SEC. “Most of the sales were required by SEC policy. Staff had no choice. They were required to sell.”
Nester explained that before staff can work on an issue that involves a company, they have to sell any holdings of stock in that firm. As a result, he said, there shouldn’t be any surprise that a sale would precede the announcement of an enforcement action.
here’s another causation vs correlation
http://www.ft.com/intl/cms/s/0/7d215c28-9d7d-11e3-a599-00144feab7de.html#axzz2uhzZqicx
Surely the IPO of one of the biggest global HFTs warrants a thread? If Virtu are worth 3BLN what are IMC and Optiver worth?
what’s your bid?
IBKR has a market cap of 1.1 B which includes timberhill and their brokerage division. Virtu may not get a fill at 3B ?
10 pe on trading firm sounds high, what are the earnings for ibkr?
Mkt for market maker PE, i am 3 at 5
I’d prefer to lure their top employees than pay that much. I doubt many of them would hesitate to move to a competitor for 20MLN each (3BLN/150)
3BLN is a joke.
to whomever posted this – anonymous
March 1st, 2014 at 9:04 pm
IBKR has a market cap of 1.1 B which includes timberhill and their brokerage division. Virtu may not get a fill at 3B ?
you need to learn how to read financials. IBKR only has floated 10% of the company. Hence the market cap is over $10B. (on their site they do point to over $4B in cash). No clue about Optiver or IMC but I don’t know if I’d be rushing to invest in a market maker these days.
you can’t do sum of parts (150 employees for 20 million each) to say 3bn is too high, for small companies, sum of parts is usually quite bit less and for mega caps, there is conglomerate discount
try doing sum of parts for whatsapp
ibkr has earnings of 400-500 million? that means pe of 15 after cash?
why is peterffy got only 10% floating, does he need the public shareholder headache? or is it just personal pride or possibly for gaining client confidence?
I can’t understand AFM putting so much effort in this. Looks like AFM puts special emphasis on the smaller local players as they lost grip on the big fast and furious. There are much bigger nuts to crack. Ever tried to hit lift that 10.000 shares on the bid/offer and only do a fraction of what was supposedly there?
you have to dig into incentives given to the afm employees, if their targets are number of prosecutions or complaints, they’ll go after the easiest ones in the town, also if their understanding is limited to just high print on low volume for a penny stock, that’s what they’ll find in their surveillance and hence the resulting efforts in those directions
bij marketwizards deden ze niet anders kevin en natan konden niet handelen allen p en d ze zijn inmiddels ook gestopt
good translation?
at market wizards they did not otherwise kevin and natan could not act all p and d they have now been stopped
The FOW event sounds truly interesting as always. Does anyone really think its a worthwhile event… I dont think so.
eh, it’s free, what more do you want>?