Tag: SEC (Page 1 of 17)

SEC Commissioner Now Says Securities Lending Facilitates Illegal Trading

SEC Commissioner Jaime Lizarraga said on Friday that securities lending facilitates illegal trading.

The official SEC statement comes after regulators have been expected to adopt new market transparency rules that will shed light on short sellers and other market participants.

“As with securities lending, short sales, provided they are conducted in compliance with applicable rules, can play a valuable price discovery role in our capital markets.

That said, they can sometimes contribute to, or even cause, precipitous price declines, facilitate market manipulation, and generate market uncertainty and volatility”, said Commissioner Lizarraga.

“To minimize the gap between these benefits and downsides, the Commission’s action today strikes the appropriate balance between increased transparency for investors and regulators of short sale-related data, and concerns about real-time disclosure of trading strategies.

Currently, Regulation SHO is the primary rule governing short sales of equities.

Although this rule imposes some recordkeeping obligations on broker-dealers, it does not require market participants to track whether short-sellers cover their short sales or report bona fide market-making information on a regular basis.

Today’s rule will shine a light on short sale activity by institutional investment managers.

It fills gaps in the data these managers currently report about their monthly and daily short sale activities.

This data is essential for the Commission to assess and monitor risks related to large short positions, for reconstructing market events, and for deterring fraud, manipulation, and other potential market abuses.

Today, investing communities have raised concerns of market manipulation in stocks such as AMC Entertainment, Meta Materials, FingerMotion, Global Tech Industries, Mullen Automotive, and many more.

Stock manipulation from short sellers, primarily hedge funds, is a topic that main street has been urging our regulators to tackle head on.

Also Read: SEC’s Director of Enforcement Now Under Investigation for Corruption

Other Market News Today

Market News Today - SEC Commissioner Now Says Securities Lending Facilitates Illegal Trading.
Market News Today – SEC Commissioner Now Says Securities Lending Facilitates Illegal Trading.

For five years Citadel incorrectly marked short sales as long sales and vice versa according to the SEC’s latest report.

Retail investors have created an uproar on social media for two primary reasons.

  1. Citadel was only fined $7 million — which investors allege is merely a ‘pay to play’ fine.
  2. Citadel’s naked short selling “conspiracies” ended not being conspiracies, despite Bloomberg and WSJ journalists idolizing Citadel’s Ken Griffin.

For years now, retail investors have raised concerns over Citadel’s hedge fund and market making power, claiming there is simply too much conflicts of interest.

The Securities and Exchange Commission says the market maker violated a provision of Regulation SHO, the regulatory framework designed to address abusive short selling practices, which requires broker-dealers to mark sale orders as long, short, or short exempt.

According to the SEC’s order, for a five-year period, it is estimated that Citadel Securities incorrectly marked millions of orders, inaccurately denoting that certain short sales were long sales and vice versa.

“Compliance with the order marking requirements of Reg SHO is a key component of regulatory efforts to curtail abusive market practices, including ‘naked’ short selling,” said Mark Cave, Associate Director of the SEC’s Division of Enforcement.

“This action against Citadel Securities demonstrates that a broker-dealer’s failure to comply with the requirements of Reg SHO can have negative downstream consequences on the accuracy of the firm’s electronic records, including its electronic blue sheet reporting, depriving the Commission of important information about the markets it regulates.”

Investors on social media say Citadel’s punishment is miniscule compared to the institutions massive gains it claims to have made, especially in the past years.

Keep in mind, Madoff never lost either.

Also Read: Judge Now Finds Broker-Dealers May Be Liable for Illegal Trading

Market News Published Daily 📰

Market News Today - SEC Commissioner Now Says Securities Lending Facilitates Illegal Trading.
Market News Today – SEC Commissioner Now Says Securities Lending Facilitates Illegal Trading.

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New Market Transparency Rules Will Shed Light on Short Sellers

New market transparency rules will shed light on short sellers and other market participants according Financial Times.

These rules are expected to be adopted by US regulators this week as part of a “broad regulatory push for greater market transparency.”

“Investors, typically hedge funds wagering that securities will fall in value — known as short selling — need to borrow stocks and bonds to make the bets before returning them to their owners.

Lenders of the securities profit by charging a fee for the borrowed assets.

Some $1.8tn of securities are loaned annually in the US, according to data cited by insurance regulators.

The US Securities and Exchange Commission on Friday is scheduled to vote on whether to push ahead with its disclosure rule.

As first aired in November 2021, the proposal would require securities lenders to report each loan within 15 minutes of the deal.

Information on the loans, but not the names of the parties involved, would be made public.”

What’s prompted these rules today has been primarily due to the aftermath of the 2008 financial crisis – a time when Wall Street celebrated with champagne as an angry public marched the streets of New York.

“Making the securities lending markets more transparent will make them more efficient, and that’s not great news for some banks’ business models,” said Tyler Gellasch, chief executive of the Healthy Markets Association.

The Investment Company Institute, which represents the funds that do most of the securities lending, has warned that the 15-minute reporting requirements will layer on costs and make the practice unprofitable.

They also warn rapid disclosures could make it easier for high-frequency traders to front-run investors, reports FT.

Also Read: SEC’s Director of Enforcement Now Under Investigation for Corruption

Other SEC News Today

Market News Today - New Market Transparency Rules Will Shed Light on Short Sellers.
Market News Today – New Market Transparency Rules Will Shed Light on Short Sellers.

The SEC has now charged Citadel Securities for illegal short selling violations according to an SEC filing published in late September.

The Securities and Exchange Commission says the market maker violated a provision of Regulation SHO, the regulatory framework designed to address abusive short selling practices, which requires broker-dealers to mark sale orders as long, short, or short exempt.

To settle the SEC’s charges, Miami-based Citadel Securities agreed to pay a $7 million penalty.

$7 million is merely a slap on the wrist to the market maker giant.

The gains Citadel collected over the years trump the SEC’s fine — retail investors allege it’s simply the ‘cost of doing business’.

According to the SEC’s order, for a five-year period, it is estimated that Citadel Securities incorrectly marked millions of orders, inaccurately denoting that certain short sales were long sales and vice versa.

The SEC’s order finds that the inaccurate marks resulted from a coding error in Citadel Securities’ automated trading system and that the firm provided the inaccurate data to regulators, including the SEC during this period.

“Compliance with the order marking requirements of Reg SHO is a key component of regulatory efforts to curtail abusive market practices, including ‘naked’ short selling,” said Mark Cave, Associate Director of the SEC’s Division of Enforcement.

“This action against Citadel Securities demonstrates that a broker-dealer’s failure to comply with the requirements of Reg SHO can have negative downstream consequences on the accuracy of the firm’s electronic records, including its electronic blue sheet reporting, depriving the Commission of important information about the markets it regulates.”

Related: For Five Years Citadel Marked Short Sales As Long

Market News Published Daily 📰

Market News Today - New Market Transparency Rules Will Shed Light on Short Sellers.
Market News Today – New Market Transparency Rules Will Shed Light on Short Sellers.

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Also, thank you to all of our blog sponsors. This year we’ve been able to increase push notifications slots making it more convenient than ever for new readers to receive their daily market news and updates.

You can also follow me on TwitterInstagramFacebook, or LinkedIn for daily news and updates on your favorite stories.


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Dark Pool Trading Has Risen Under Gensler’s Watch

Market News Daily - Dark Pool Trading Has Risen Under Gensler's Watch.
Market News Daily – Dark Pool Trading Has Risen Under Gensler’s Watch.

Dark pool trading has risen substantially since Gary Gensler was appointed Chair of the Securities and Exchange Commission (SEC) in April of 2021 by President Joe Biden.

Gary Gensler announced exclusively on Bloomberg that 90-95% of retail orders don’t go through the lit exchange.

The SEC Commissioner says these orders are rerouted to dark pools rather than the NYSE.

What are dark pools?

Dark pools are privately organized platforms, also known to be an alternative trading system accessible to only institutions.

SEC Chairman and Commissioner Gary Gensler says payment for order flow is partly the reason why orders aren’t processed on the lit exchange.

He says retail orders go to wholesalers on an order-by-order competition.

Citadel’s Ken Griffin has praised PFOF stating it’s good for retail investors; however, in 2004 Citadel stated payment for order flow “creates conflicts of interest and should be banned, according to an SEC file.

PFOF allows market makers to process retails orders in the ‘dark markets’, or dark pools, per SEC Chairman Gary Gensler.

Dark pool trading has risen under Gensler’s watch.

Banning PFOF is one thing but what about retail demand that has been masked by dark pools?

The SEC actually has the power to ban dark pool trading.

Why dark pool trading has risen since Gary Gensler took office is something the retail community is trying to comprehend.

Dark Pools Have Been Robbing Retail Capital

When more than 50% of a stock’s trading volume goes to dark pools, the demand is cut by 50%, often times more depending on the trading day.

Half (or more) of retail’s money is not being reflected per the real demand of a security when trading has been rerouted to dark pools.

In other words, dark pools allow institutions to suppress shares from rising based on the true demand of a security.

Let’s take a look at AMC’s dark pool volume for July and August, 2023.

AMC Dark Pool Volume History – July and August 2023 – source.

Dark pool volume rose as high as 64% in July and 60% in August so far.

This means that for every dollar retail put into AMC Entertainment stock, only 36%-40% of that dollar counted towards demand in the lit exchange.

Clearly a huge advantage for institutions going short on a company, especially one like AMC Entertainment who has a high short interest of 28%.

But this is happening to stocks all over the markets.

And the problem has only grown since Gary Gensler took office in 2021.

SEC Scraps Vote for Hedge Fund Transparency Rule

The SEC recently scrapped to vote for a hedge fund transparency rule.

The Securities and Exchange Commission scrapped plans to vote on a rule that would have increased regulators’ visibility into financial risks at some hedge funds and private equity funds.

After scheduling the vote earlier this month, the five-member commission “decided to take a little more time” on the rule, an SEC spokeswoman said.

The rule, proposed early last year over Republican opposition, would have increased reporting requirements for filers of a confidential document called Form PF.

Among other proposed changes, it would have required large hedge funds to file reports within one business day of incidents such as extraordinary investment losses, defaults by major counterparties or spikes in margin requirements.

The rule sparked pushback from lobbyists for the hedge-fund and private-equity industries in Washington.

The Managed Funds Association, which represents hedge funds, urged the SEC last week to hold off on finalizing the rule until it was ready to adopt a separate Form PF proposal issued last August.

The Managed Funds Association, or MFA, is an association made up of a variety of hedge fund managers, including Citadel, Two Sigma, Point72, and Millennium Management.

Also Read: AMC Stock: The SEC Has Now Violated Threshold Rule

Market News Published Daily

Market News Today - Dark Pool Trading Has Risen Under Gensler's Watch.
Market News Today – Dark Pool Trading Has Risen Under Gensler’s Watch.

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Bankers Urge the SEC to Look into Manipulative Trading

Market News Daily - Bankers Urge the SEC to Look into Manipulative Trading.
Market News Daily – Bankers Urge the SEC to Look into Manipulative Trading.

Bankers are urging the SEC to looking into manipulative trading, particularly into abusive short selling.

Earlier this week, Reuters reported that the White House had vowed to monitor the possibility of illegal short selling as shares in the banking sector plunged.

Shares of PacWest Bancorp (NASDAQ:PACW) fell more than -50% on Thursday but recouped its losses on Friday.

PACW stock is still down more than -45% in the past week and more than -75% this year-to-date.

Now The American Bankers Association on is urging federal regulators to investigate significant short sales of publicly traded banking equities that it said were “disconnected from the underlying financial realities.”

Retail investors are raising concerns over the banking sector’s requests, stating that the SEC should address manipulative trading practices in individual company stocks too, not just within the banking sector.

“We urge the SEC to consider all its existing tools and to take measures to reduce the avenues for abusive trading practices and restore investor confidence,” the banking group said.

“These measures include, at a minimum, a clear message and appropriate enforcement actions against market manipulation and other abusive short selling practices.”

The Fight Against Manipulative Short Selling Grows

Market News Daily - Bankers Urge the SEC to Look into Manipulative Trading.
Market News Daily – Bankers Urge the SEC to Look into Manipulative Trading.

Short sellers made approximately $378.9 million in paper profits on Thursday alone from betting against certain regional banks, according to Ortex.

U.S. federal and state officials are assessing the possibility of “market manipulation” behind big moves in banking share prices in recent days, a source familiar with the matter said on Thursday, as the White House vowed to monitor “short-selling pressures on healthy banks.”

Increased short-selling activity and volatility in shares have drawn increasing scrutiny by federal and state officials and regulators in recent days, given strong fundamentals in the sector and sufficient capital levels, said the source, who was not authorized to speak publicly.

“State and federal regulators and officials are increasingly attentive to the possibility of market manipulation regarding banking equities,” the source said.

White House press secretary Karine Jean-Pierre said the Biden administration was closely watching on the situation.

ABA President and CEO Rob Nichols told Gensler that short selling could be a legitimate financial tool, but his group was “unalterably opposed to short selling practices that distort the markets through manipulation and abuse.”

He called on Gensler to send a clear message to market players and take appropriate enforcement action against market manipulation and other abusive short selling practices, per Reuters.

“The harm caused by short selling that runs counter to economic fundamentals ultimately falls on small investors, who see value destroyed by others’ predatory behavior,” he said.

Chairman Gensler on Thursday said the agency would go after any form of misconduct that might threaten investors or markets.

Investors Are Looking for Relief

Retail investors invested in several companies are looking for relief in the market.

Mullen Automotive for example just announced the company will be opening an investigation into potential market manipulation and illegal short selling of its stock, MULN.

“These steps include retaining outside counsel, which is working with Shareholder Intelligence Services LLC (“ShareIntel”) to undertake a comprehensive analysis of data derived from broker-dealers, clearing firms and other sources to provide actionable intelligence on potential market manipulation and illegal short selling,” the company said.

Investors in $GTII and now delisted ticker symbol $MMTLP have their own unique battles against manipulative short selling.

There are several companies who are experiencing manipulative trading by big institutions.

The question is whether the SEC will begin to enforce strict policy to keep these institutions in line.

Nearly 35,000 retail investors have signed a letter to the SEC published by We The Investors requesting improvements to market rules and new disclosures.

But Wall Street keeps fight back.

For more market news and updates, join the newsletter below.

Related: Big Hedge Funds Now Have to Report Losses in Real-Time

Market News Published Daily

Market News Today - Bankers Urge the SEC to Look into Manipulative Trading.
Market News Today – Bankers Urge the SEC to Look into Manipulative Trading.

For stock market, business news and updates, join the newsletter to receive weekly market news and notifications straight to your inbox.

Franknez.com is the media site that keeps retail investors informed.

You can also follow Frank Nez on TwitterInstagramFacebook, or LinkedIn for daily posts.


Franknez.com

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  • Gain access to EXCLUSIVE FrankNez articles you won’t find here.
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