Tag: SEC (Page 1 of 7)

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

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

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Virtu Faces New Enforcement Action by the SEC

Market News Daily - Virtu Faces New Enforcement Action by the SEC.
Market News Daily – Virtu Faces New Enforcement Action by the SEC.

Market maker Virtu is currently facing new enforcement action by the Securities and Exchange Commission (SEC).

(WSJ) The firm disclosed last week that it is facing a potential enforcement lawsuit from the Securities and Exchange Commission.

Virtu disclosed in a quarterly filing after Friday’s closing bell that it had engaged in settlement discussions with the SEC about an investigation related to “information barriers policies and procedures” between January 2018 and April 2019.

The company first disclosed the probe in February. Its updated disclosure suggested that the SEC could be moving forward with a lawsuit.

Virtu said it “currently believes it may receive a Wells notice from the SEC,” referring to a type of letter that the agency’s staffers send to companies or individuals to inform them of a possible enforcement action.

A Virtu spokesman said the investigation was “primarily focused on an access controls weakness in one of our internal back office systems containing post trade information that theoretically could allow certain system users access greater than what was intended by our policies.”

“We have no reason to believe and have found no evidence that anyone ever made any improper use of any client information”, said Virtu.

SEC Fines Virtu for Abusing Dark Pools

In 2019, the SEC announced that Virtu Americas LLC (f/k/a KCG Americas LLC) agreed to pay $1.5 million to settle charges for failing to comply with Regulation SCI.

According to the SEC’s order, KCG Americas operated an alternative trading system, or ATS, commonly referred to as a “dark pool.”

An ATS that exceeds certain trading volume thresholds is required to comply with Regulation SCI.

The SEC order finds that KCG Americas implemented an automated system that was intended to keep its dark pool’s trading volume below the volume thresholds by discontinuing trading in particular securities before the thresholds were met.

KCG Americas relied on this system for more than a year and half.

However, according to the SEC’s order, the system did not function as intended, causing trading to exceed the thresholds that triggered the need to comply with Regulation SCI.

The SEC’s order finds that Virtu willfully violated the policy and procedure.

Without admitting or denying the SEC’s findings, Virtu consented to the entry of a cease and desist order and agreed to be censured and to pay a penalty $1.5 million.

Market News Published Daily

Market News Today - Is Amazon buying AMC Entertainment?
Market News Today – Virtu Faces New Enforcement Action by the SEC.

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35,000 Retail Investors Sign SEC Letter for New Rules

Market News Daily - 35,000 Retail Investors Sign SEC Letter for New Rules.
Market News Daily – 35,000 Retail Investors Sign SEC Letter for New Rules.

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.

The letter is introducing new disclosure in lending transparency, margin transparency, netting transparency, FTD transparency, as well as disclosure of registration, and many other rules that will help level the playing field for retail investors.

We The Investors has given retail investors an organized, professional, and formal stance in the finance world.

For once, Wall Street vs Main Street are going head-to-head like never seen before.

Retail investors have become highly knowledgeable about the stock market and how regulation is primarily tailored to better suit institutional investors over the average investor.

This decade is going to bring forth some of the biggest changes in the stock market.

Here are the latest news and updates.

We The Investors SEC Letter

Market News Daily - 35,000 Retail Investors Sign SEC Letter for New Rules.
Market News Daily – 35,000 Retail Investors Sign SEC Letter for New Rules.

“Dear Chairman Gensler,

Since the launch of We The Investors in March, 2022, we have had over 100,000 retail investors sign up to support our various efforts to advocate for five basic principles in market reform: transparency, simplicity and fairness, choice and control, best execution and better settlement and clearing.

Our grassroots advocacy campaign has a simple goal – to empower retail investors to represent themselves while advocating for market structure reforms.

Today we write to you to continue this campaign and urge you to address one of the most opaque areas of market structure – the settlement and clearing systems that have problematic disclosures around stock lending, failures to deliver (“FTDs”), margin and netting, and the practices that enable business models predicated on FTDs.

When you discussed naked shorting and FTDs on the Jon Stewart podcast, you agreed that “we need more transparency and better transparency about a really core part of the market [] when somebody sells securities they don’t own.”

The Commission has focused with its recent proposals (10c-1 and 13f-2) on disclosure of stock borrowing and short selling by investment managers, and we applaud and support those efforts. 

However, we do not believe that these efforts go far enough, and we would like the SEC to re-examine the disclosures and mechanisms in place in this “core part of the market.”

As such, we write to you requesting the following improvements to market rules and disclosures – a roadmap for change.

Retail Investors Propose New Disclosures from SEC

Market News Daily - 35,000 Retail Investors Sign SEC Letter for New Rules.
Market News Daily – 35,000 Retail Investors Sign SEC Letter for New Rules.

Nearly 35,000 retail investors have signed an SEC letter proposing new disclosures and rules for market transparency.

Outlined below are the disclosures and rules detailed in the letter.

“First, we believe that there is a comprehensive set of new disclosures that could shed light into this opaque portion of the market:

  • Lending Transparency: Retail investors have the right to know whether their securities have been lent out, and how much revenue the broker has received.
  • Margin Transparency: Investors need visibility into the estimated margin per security for Clearing Brokers.
  • Netting Transparency: Investors need disclosure of gross versus net notional or share count per security to help understand trading dynamics and discern the level of real investment versus intraday trading activity.
  • FTD Transparency: Failure To Deliver disclosures need to be updated more often, and include more information, including how and when FTDs are remediated, what type of counterparty is responsible for the failure (bucketed into clearing broker, exempt market maker or custodian), and how long the FTDs remained open.
  • Disclosure of Registration: Public companies should be required to disclose directly registered shareholder numbers on all 10-Q and 10-K reports.

Next, we believe that retail brokers must be obligated to give their investors more control over the lending of their securities and how those securities are registered:

  • NOBO/OBO designations: Brokers should explain to investors the choices they may make as it relates to transparency of share ownership, where shares are recorded in a brokerage account in beneficial format. The default options should always be NOBO (non-objecting beneficial owner). Shielding holdings from investee companies through the use of OBO (objecting beneficial owner) designations should be a right that an investor should opt in to. Brokers should provide the investor’s email address as part of any disclosure of NOBO holdings.
  • Control of Stock Lending: Investors have the right to decide whether their securities can be lent out to short sellers. Disclosures around account types and the implications therein need to be made simpler, easier to understand, and more explicit in the account creation process.
  • Control of Registration: Investors should be able to choose whether their shares are to be held in a brokerage account or in direct registration form in the investor’s own name on the company’s share register. Brokers should be required to support the direct registration of shares in an investor’s name.
  • Investor Communications and Proxy Voting: Investors should be able to receive their communication directly from the company they invest in and not have their shareholding pooled with other clients of the broker, whose interests may not be aligned. Investors should be able to vote directly with the company, and have their voice heard at general or extraordinary shareholder meetings. Their votes should be directly confirmed by the company or its agent.

Retail Investors Demand Change in the Market

“Finally, we urge you to reform the settlement and clearing system to end problematic practices that can distort price discovery and supply/demand dynamics:

  • End the “Market Maker” Exemption to Reg SHO: As SEC enforcement has shown, so-called “market makers” have abused this exemption to Reg SHO that allows them to sell shares short without a locate. Markets would better reflect actual supply and demand dynamics if all trading firms had to locate shares before selling short. The SEC should further set a goal of a more robust, transparent, electronic locate workflow and standard.
  • End “Fails as a Business Model”: Too many firms rely on failing to deliver on their short sales to prop up or sustain their business models. This practice must be ended, either by enforcing mandatory buy-ins or through interest charges on failures. This would entail a more comprehensive overhaul of the US settlement system, and one potentially modeled on the European Settlement Discipline Regime.

We urge you to take these actions to improve transparency in markets, shine a light on the most opaque part of our market’s plumbing, to ensure that prices in the market reflect actual supply and demand, and to guarantee that brokers give investors the appropriate level of control and disclosure so they can make the decisions appropriate to their unique, individual circumstances.

We would be happy to meet with you and discuss any of these proposals in more detail.”

You can sign the official letter from We The Investors on their official website.

If you would like to receive more updates and news for the retail community like this, join the newsletter below.

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Market News Today - 35,000 Retail Investors Sign SEC Letter for New Rules.
Market News Today – 35,000 Retail Investors Sign SEC Letter for New Rules.

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Wall Street Threatens to Sue SEC if New Proposals Pass

Market News Daily - Wall Street Gets Ready to Sue SEC if Proposals Pass.
Market News Daily – Wall Street Threatens to Sue SEC if New Proposals Pass.

Wall Street is threatening to sue the SEC if proposals that will change how retail orders are executed gets passed.

Gensler has been critical of payment for order flow (PFOF), whereby some retail brokers (including Schwab, ETrade and Robinhood) route orders to electronic market makers known as wholesalers (including Citadel and Virtu), who pay the brokers for access to that order flow.

These wholesalers may send the orders to exchanges and profit from spreads or even from price direction through the derivatives market, hence the major conflict of interest.

SEC Commissioners Hester Peirce and Mark Uyeda, both Republicans, also filed statements opposing the proposal. 

“This latest effort to order competition threatens to create disorder in the capital markets, the functioning of which is so important to the rest of our economy,” Peirce wrote in a statement. 

The Intercept wrote a piece on Hester Peirce in 2015 titled, “SEC Nominee To Oversee Wall Street Works At Think Tank Dedicated To Blocking Regulation.”

And according to the research, Hester Peirce received 98% of her salary from the Mercatus Center, a “think tank” that provides an academic façade to a radical anti-regulatory agenda.

In other words, Hester is a plant on the SEC meant to cater to Wall Street, not retail investors.

‘We The Investors’ Challenges Wall Street

‘We The Investors’ is taking Wall Street head on.

More than 1,300 letters have been submitted to the SEC supporting rules proposed in December that represent the biggest changes to equities trading in nearly two decades, according to Reuters.

The collective of retail investors have joined ‘We The Investors’ led by Dave Lauer in efforts to combat Wall Street as a legitimate organization that sprouted from the events of the ‘meme stock’ frenzy in 2021.

We The Investors has held two online meetings since December with SEC Chair Gary Gensler, who took questions directly from retail investors on the proposals, which include requiring most retail stock orders to be sent to auctions to boost competition.

Other proposed rules call for a new standard for brokers to demonstrate they’ve gotten the best execution for clients on transactions, as well as lower trading increments and access fees on exchanges, and stronger disclosure around retail order executions.

But Wall Street is pushing back.

The NYSE teamed up with retail broker Charles Schwab Corp and market maker Citadel Securities earlier this month to ask the U.S. Securities and Exchange Commission to withdraw two recently proposed rules aimed at revamping how stocks trade.

The move represents a coordinated industry push back against what are potentially the most impactful proposals in the SEC’s biggest attempt to reform stock market rules in nearly 20 years.

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

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

The SEC Faces Potential Lawsuits from Wall Street

Market News Today - Wall Street Gets Ready to Sue SEC if Proposals Pass.
Market News Today – Wall Street Gets Ready to Sue SEC if Proposals Pass.

Wall Street institutions are already threatening litigation if the proposals go through. 

“Ultimately, it’s going to end up, unfortunately, sadly, probably in litigation [if Gensler] decides to go down this road,” Virtu CEO Doug Cifu said in an interview at the Securities Traders Association of New York conference on March 27th at the NYSE. 

Cifu specifically cited the Administrative Procedures Act (APA), which governs the way government agencies may propose and establish regulations. 

The SEC must follow procedures outlined in the APA.  If not, it can get sued. 

Gensler is proposing a new rule, Regulation Best Execution, that would establish a national best execution standard to ensure broker-dealers send orders to the venue that will get the best price for buyers and sellers.

But FINRA is currently in control of the best execution rule, a rule Gensler believes the SEC should have, not FINRA.

FINRA is under serious scrutiny due to many scandals with the most recent having to do with the U3 halt and delisting of MMTLP stock.

Retail investors have also criticized the SEC for kneeling to Wall Street and failing to protect small investors from predatorial market practices.

Many in the retail community say SEC commissioners should be voted in, not appointed by the U.S. President.

Market News Published Daily

Market News Today - Wall Street Gets Ready to Sue SEC if Proposals Pass.
Market News Today – Wall Street Gets Ready to Sue SEC if Proposals Pass.

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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 March, 2023.

AMC Dark Pool Volume History - March 2023.
AMC Dark Pool Volume History – March 2023 – source.

Dark pool volume rose as high as 62%.

This means that for every dollar retail put into AMC Entertainment stock, only 38% 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 25%.

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.

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

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MMTLP Scandal Recognized as Biggest Wall Street Fraud

Market News Daily: MMTLP scandal gets recognized as one of the biggest Wall Street fraud events.
Market News Daily: MMTLP scandal gets recognized as one of the biggest Wall Street fraud events.

The MMTLP scandal is being recognized as one of the biggest Wall Street frauds of the decade.

One of the most recent scandals has been that of the ‘meme stock’ frenzy when broker firms, hedge funds, and even regulators colluded to stop AMC, GameStop, and other stocks from rising.

Investors who held shares of MMTLP stock on the record date of December 12 would receive a preferred dividend of Next Bridge Hydrocarbon on Wednesday, December the 14th.

Investors anticipated a long-awaited MMTLP short squeeze during the last few trading days prior to the spinoff — primarily due to big buying volume flooding the market to receive Next Bridge Hydrocarbon shares.

However, MMTLP stock stopped trading on Thursday, December 8 after FINRA delisted the security without notice or warning.

FINRA released the following statement:

“Effective Friday, December 09, 2022, the Financial Industry Regulatory Authority, Inc. (“FINRA”) halted trading and quoting in the Series A preferred shares of Meta Materials Inc. (OTC Symbol: MMTLP).

Pursuant to Rule 6440(a)(3), FINRA has determined that an extraordinary event has occurred or is ongoing that has caused or has the potential to cause significant uncertainty in the settlement and clearance process for shares in MMTLP and that, therefore, halting trading and quoting in MMTLP is necessary to protect investors and the public interest.

The trading and quoting halt will end concurrent with the deletion of the symbol effective Tuesday, December 13, 2022.”

“See also Form S1 Registration Statement for Next Bridge Hydrocarbons, Inc. stating that…immediately after the Spin-Off, all shares of Series A Non-Voting Preferred Stock of Meta shall be cancelled. Available here.”

Next Bridge Hydrocarbons Weighs In

In simple terms, FINRA’s only explanation was that the halt was due to ‘uncertainty’ in the settlement process which could harm investors and public interest.

And perhaps that’s true — though shareholders don’t think they were referring to retail investors at all, but rather FINRA’s private investors and institutional partners, the hedge funds.

Next Bridge Hydrocarbons released the following statement regarding the MMTLP halt.

“We recognize that some of our shareholders who owned Meta’s Series A Non-Voting Preferred Stock prior to the Spin-Off might have been affected by FINRA’s halting of the trading in that stock while the Company was still wholly owned and controlled by Meta.

The current board and officers of the Company have no information from FINRA regarding the Trading Halt other than the information in the public notice published by FINRA announcing the Trading Halt.

Further, FINRA did not provide any advance notice to the Company or Meta prior to its initiating the Trading Halt.

While we were not involved in the Trading Halt, we certainly empathize with anyone adversely affected by the Trading Halt and are assessing the matter.

The Company believes that our primary means of delivering shareholder value is to develop our interests in the Orogrande Basin, and we remain focused on this objective.”

But investors remain confused as to what happened to their money which was frozen from trading prior to the delisting.

What’s happened with MMTLP has become one of the biggest Wall Street frauds in financial history.

Real People Have Been Affected

Market News Daily: MMTLP scandal gets recognized as one of the biggest Wall Street fraud events.

“It was the anniversary of my husband’s passing; it was a really hard time. My kids all understood what was happening with MMTLP, and it was hard for them to understand, it was hard for me to admit to my kids the depth of the dishonesty, and lying, and cheating, and stealing that goes on in our country”, says MMTLP investor Deborah W.

“I went through the 18 months of just stringing me and my family and everyone everybody with holding off on things that we might have wanted to do; vacations we wanted to take, because I didn’t want to pull any of the money out of what I had in. And MMTLP, I had liquidated other positions, I took every spare dime we had, and I put it towards MMTLP”, says Huck, another MMTLP investor.

FINRA placed a U3 halt on MMTLP on the final days before it was delisted.

It was one of three U3 halts in the OTC market in U.S. history.

The U3 halt froze MMTLP shares so shareholders couldn’t buy nor take their money out from the security.

MMTLP was delisted, robbing MMTLP investors of their money right in front of their eyes.

The delisting protected hedge funds from having to close their short positions right before shares of MMTLP stock began to rise, or squeeze.

Retail investors are naming the MMTLP scandal one of the biggest Wall Street frauds in financial history.

Investors lost their entire retirement funds and life savings in MMTLP.

Aside from the public announcements in the beginning of this article, FINRA nor the SEC have been able to explain truly what happened to investors shares of Next Bridge Hydrocarbons, or their money invested in MMTLP stock.

In the video below, MMTLP Studios goes over possible solutions the SEC and FINRA can take to make things better, along with other investor comments.

Were You Affected by the MMTLP Wall Street Fraud?

First, I’d like to say that my heart goes out to those affected by this unfair and unprecedented event in MMTLP.

Many investors in several communities are experiencing blatant manipulation in their favorite company stock in similar or their own unique way.

Raising awareness is the first step to getting the message seen.

I’ve seen and heard some of your stories through the community.

If you were affected by the MMTLP Wall Street fraud and would like to share your story, please feel free to comment it down below for other retail investors to see.

Share this article to get your voice and story heard.

Market News Published Daily

Market News Daily: MMTLP scandal gets recognized as one of the biggest Wall Street fraud events.
Market News Today – MMTLP Scandal Recognized as Biggest Wall Street Fraud.

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.


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My New Book is Out Now! Use Code: THENEZ


Regulators Strengthen Punishment for Naked Short Selling

Market News Today - Regulators Strengthen Punishment for Naked Short Selling.
Market News Today – Regulators Strengthen Punishment for Naked Short Selling.

(BK) The Securities and Futures Commission of the Financial Services Commission imposed a pecuniary penalty of 6.05 billion won (US$4.58 million) on two securities companies that committed naked short selling.

The Financial Investment Services and Capital Markets Act of South Korea was revised in April 2021 so that illegal short sellers will face pecuniary penalties instead of fines.

The two companies have become the first such case.

Today, naked short selling is illegal in South Korea, unlike covered short selling.

Investors in the United States have raised naked short selling concerns on social media, urging the Securities and Exchange Commission to model the practice of nations such as South Korea.

Previously, illegal short selling in the South Korean stock market was detected infrequently and violators could go almost unpunished.

This is because the maximum fine according to the act before the revision was 100 million won (US$75,694).

According to the amended act, the maximum pecuniary penalty is equal to the amount of illegal short selling.

In addition, violation may lead to at least one year in prison or a fine equivalent to 300 to 500 percent of the illegal profit or avoided loss.

This model is raising attention in the United States as the predatorial practice has dominated the industry for decades.

Naked Short Selling in America

Market News Today - Regulators Strengthen Punishment for Naked Short Selling.
Market News Today – Regulators Strengthen Punishment for Naked Short Selling.

Today, naked short selling in the American markets is given a blind eye.

Retail investors believe U.S. regulators to be complicit in the market injustices that occur on a daily basis.

(Singapore) Genius Group (NYSEAMERICAN:GNS) CEO Roger Hamilton has led CEOs to take legal action against naked short selling in the market.

He recently shared a petition on social media to end naked short selling in efforts to raise awareness of the illegal short selling strategy.

Naked shorting is the illegal practice of short selling shares that have not been affirmatively determined to exist, per Investopedia.

The predatorial practice allows short sellers to short a stock without there actually being any stock available to short.

In 2015, The SEC approved the use of naked short selling on IPOs although it was deemed an illegal practice in 2010.

Roger Hamilton says he noticed something was wrong in his company stock after shares would plummet despite his company having strong fundamentals and funding.

This is when he began to speak publicly about what was happening to his company.

Another public figure who has spoken out against naked short selling is Jon Stewart.

Regulators have always had the power to stop the manipulation happening in our stock market but have created rules that cater primarily to hedge funds.

“The Game is Rigged” Says Ex-Citadel Data Scientist

Patrick McConlogue, an ex-Citadel Data Scientist said during the ‘meme stock’ frenzy that the stock market is rigged, claiming he helped design it.

“The game is not fair and it never has been. Individual investors, even when operating in a swarm, are destined to lose. How do I know? I helped design the game.”

The dilemma here is that institutions are able to get away with the ‘capitalism’ card every time an issue is brought to their attention.

SEC Chairman Gensler has said that the SEC cannot completely interfere with the industry due to a company’s capitalistic rights in America.

Which makes sense through a capitalistic view, however, there should be tougher laws in certain sectors and industries, especially those that have the power to create massive economic downturns.

Regulators in other countries have strengthened the punishment for naked short selling for a reason — the manipulation creates systemic risk.

The question is, how many times will the U.S have to see the collapse of markets and our economy to understand this?

Other countries have recognized these fallacies in their market, maybe it’s time the U.S does the same.

Related: ‘We The Investors’ Challenges Wall Street on New SEC Proposals

Market News Published Daily

Market News Today - Regulators Strengthen Punishment for Naked Short Selling.
Market News Today – Regulators Strengthen Punishment for Naked Short Selling.

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Citadel Has a Long History of Market Manipulation

Citadel Market Manipulation
Market News: Citadel and friends are entering the crypto space | Ken Griffin.

Ken Griffin and friends are entering the crypto world very soon — investors are concerned as Citadel has a history of several violations and fines.

EDX Markets plans to bring ‘traditional finance’ to the crypto space, a not so ‘traditional’ space to begin with.

The exchange made up of Citadel, Sequoia, Paradigm, Virtu, Charles Schwab, and Fidelity is debuting in November.

EDX Markets will start trading a limited number of spot, crypto tokens starting with a November trial period, with the official launch in January, per Bloomberg.

Similar to trading equities and options, EDX will allow investors to buy and sell digital assets through their existing broker dealer, rather than an outside venue or directly through a crypto-native exchange. 

“We’re taking some of the best features of traditional finance and bringing it to the digital markets to make it more efficient, and bring that cost saving to investors,” Nazarali said.

Nazarali is the former global head of business development at Citadel Securities.

But as many are aware, these financial institutions have a long history of playing unfair.

Will these sharks taint the crypto space too?

Let’s look at Citadel’s market manipulation history as well as other Citadel violations and fines in the past.

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Citadel Market Manipulation

Citadel Fines and market manipulation.
Citadel violation and fines – market manipulation.

2015

In 2015, an account operated in China by the brokerage arm of US hedge fund Citadel was suspended.

It was the latest casualty of regulators’ hunt for market manipulators and short sellers at the time.

The China Securities Regulatory Commission said that the Shanghai and Shenzhen stock exchanges had suspended 24 accounts as part of a probe into high-frequency trading.

The investigation focused on a practice known as “spoofing” in which an investor submits a buy or sell order but then withdraws it before a sale is completed — a practice that can mislead investors by creating the false impression that a stock is trading at a particular price.

Citadel confirmed that one of its accounts managed by Guosen Futures was among those suspended.

2017

SEC Citadel

In 2017 Citadel was fined by the SEC $22.6 million to settle charges of misleading conduct.

The hedge fund misled customers about the way it priced trades.

The SEC found that between 2007 and 2010, Citadel used two algorithms to execute stock trades on customers’ behalf that gave investors a worse price for their trades, even when Citadel knew better prices existed elsewhere.

“This affected millions of retail orders,” said Stephanie Avakian, the acting director of enforcement at the SEC at the time.

Citadel neither admitted nor denied the findings.

2021

Citadel violations and fines.
Citadel violations and fines – market manipulation.

In 2021, Failure-to-Delivers (FTDs) rose dramatically in the period leading up to January 28th, 2021, a phenomenon consistent with increasing short interest by market makers such as Citadel Securities.

FTDs are indictive of naked short selling, which occurs when a short seller does not actually possess the security it is supposed to borrow.

This practice is largely inaccessible to individual investors but accessible to market makers.

At the time, Citadel, Robinhood, and others restricted retail investors from buying ‘meme stocks’ in order to prevent escalating institutional losses.

Citadel eventually lost billions after betting against AMC Entertainment in 2021.

But the entire system needs a refresh – The DTCC waived a total of $9.7 billion of collateral deposit requirements on January 28, 2021, saving brokers, and screwing up retail investors.

2022

The Chicago Tribune published a piece explaining exactly what retail investors have been warning the SEC about.

Citadel Securities’ dark pool dominates a big part of the financial world, accounting for as much as half of U.S. stock market activity.

The Chicago Tribune says this prominent dark pool is run by Chicago Billionaire Ken Griffin’s Citadel Securities and has been targeting small scale retail investors.

And they’re not wrong.

Dark pools are typically involved in payment for order flow (PFOF), where they pay broker firms to receive retail order flow.

Brokers such as Robinhood and TD Ameritrade accept payment for order flow.

But retail investors have been bringing these nefarious practices in the market to light.

Related: Biotech Company Suing Citadel Over Market Manipulation

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Citadel, Charles Schwab Team Up to Destroy SEC Proposals

Citadel, Charles Schwab Team Up to Fight SEC Proposals
Market News Daily: Wall Street Pushes Back Against SEC Stock Market Reforms 2023.

(Reuters) The New York Stock Exchange teamed up with retail broker Charles Schwab Corp and market maker Citadel Securities on Monday to ask the U.S. Securities and Exchange Commission to withdraw two recently proposed rules aimed at revamping how stocks trade.

The move represents a coordinated industry push back against what are potentially the most impactful proposals in the SEC’s biggest attempt to reform stock market rules in nearly 20 years.

“We are deeply concerned that the Commission has simultaneously issued multiple far-reaching proposals that would dramatically overhaul current market structure without adequately assessing the cumulative impact on the market or the potential for unintended consequences,” the companies said in an SEC comment letter.

The SEC in December proposed requiring nearly all retail stock orders to be sent to auctions, as well as a new standard for brokers to show they get the best possible executions for their clients’ orders.

The SEC also proposed lower trading increments and access fees on exchanges, and more robust retail order execution disclosures.

And now Citadel, Charles Schwab, and the New York Stock Exchange are fighting against these proposals that will help level the playing field for retail investors.

Payment for order flow has annihilated competition and reserved market maker Citadel Securities the right to buy retail orders from brokers such as Robinhood and TD Ameritrade.

During an interview with SEC Chairman Gary Gensler, the Chairman tells ‘We The Investors‘ that he believes the SEC should have the ‘Best Execution Rule‘, not the self-regulatory organization, FINRA.

Citadel Said in 2004 PFOF Should Be Banned

New York Stock Exchange News | Citadel SEC News Today.
New York Stock Exchange News | Citadel SEC News Today.

Citadel pushed back on the possibility of a payment for order flow (PFOF) ban in June of 2022.

But Citadel said in 2004 that payment for order flow creates conflicts of interest and should be banned, according to an SEC file.

Gary Gensler said there may be a conflict of interest for brokers and that too much power is concentrated in a handful of market makers.

The SEC Chairman plans to reroute retail investors into an automated system that would provide a deep pool of liquidity.

The aim of the proposed rules is to improve market quality and efficiency, by boosting competition for retail stock orders and reducing unnecessary intermediation, SEC Chair Gary Gensler has said.

However, the NYSE, along with Schwab and Citadel Securities, asked the SEC to indefinitely withdraw the auction and best execution proposals, saying they could lead to less market liquidity and create confusing regulatory overlap.

“We believe that this more targeted approach will result in significant benefits for U.S. equity market participants, while meaningfully reducing the risk of negative outcomes for markets and investors, including the risk of firms retreating from being liquidity providers – which would be particularly detrimental to retail investors,” they said.

Related: Global Head of Operations at Citadel Has a Board Seat at DTCC

Market News Published Daily

Market News Today - Citadel News Today.
Market News Today – Wall Street Pushes Back Against SEC Stock Market Reforms | Citadel against SEC Proposals 2023.

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The SEC Green-Lighted Naked Shorting of IPOs in 2015

SEC Naked Shorting
Market News Today: The SEC green-lighted naked shorting in 2015.

Forbes published a piece surrounding Uber’s ‘troubled’ IPO stating that the SEC green-lighted naked shorting of IPOs in 2015.

“A curious thing happened during Uber’s troubled initial public offering last week: naked short selling of UBER shares by the banks involved in placing Uber’s IPO, according to several sources who confirmed this to CNBC.

Normally, naked short selling is illegal.

But it was legal in this case, and it gave the banks a chance to profit–as investors lost money–when the IPO traded down 18% in its first two days.

Naked-shorting of IPOs by banks, which the SEC green-lighted as recently as 2015, has changed IPO market dynamics by altering the relative power between banks, issuers and investors. 

To the detriment of investors, banks now have less fear of incurring major losses from pricing an IPO too high because banks now have a tool (naked shorting) to protect their downside risk.”

Forbes said that thanks to the SEC’s explicit statement allowing naked shorting during IPOs, banks have a chance to win regardless of what the IPO is priced at, a fear they had prior to getting the green light on naked shorting.

In a space call with Genius Group ($GNS) CEO Roger Hamilton, a user had stepped up to question the proof of naked shorting discussed about in sort of media or case.

As you can imagine, speakers on the panel were quick to give the user the information they lacked to research in the first place.

But it’s there, and this is just one case on the proof of naked shorting in the market.

GNS Shares Plummet After IPO

2023 GNS #NakedShortsWar.
2023 GNS #NakedShortsWar.

Genius Group CEO Roger Hamilton said he suspected naked shorting was happening in his company stock after shares had gradually plunged after their IPO date.

Roger Hamilton has been leading the fight against naked shorts by not only raising awareness on social media but also by taking legal action.

The company just launched phase 2 of their legal battle against naked short selling.

One of the topics discussed in the space call with Roger was of dual listing using the blockchain.

My thoughts on the blockchain are that it provided accountability and less stress on investors when dealing with manipulative shorting tactics.

It’s still a very new innovation, especially when discussing a tradable blockchain exchange.

A great effort to fight naked shorting nonetheless.

“Naked shorting is impossible to do when securities are issued natively on a blockchain. Had Uber’s shares been issued on a blockchain rather than through legacy systems, banks simply would not have been able to issue more UBER shares than the quantity of shares outstanding. The price-suppressive impact of the naked shorting–however large or small it was in the Uber case–simply could not have happened,” said Forbes.

Related: Citadel Said in 2004 Payment for Order Flow Creates Conflicts and Should Be Banned

A History on Naked Short Selling

What is naked shorting?

Naked short selling, or naked shorting, is the practice of short-selling a tradable asset of any kind without first borrowing the asset from someone else or ensuring that it can be borrowed.

Naked shorting was enabled legally by UCC Article 8 in 1994, owing to a combination of two features: (1) indirect ownership of publicly-traded securities and (2) a special exemption that obviates the normal requirement that the seller prove in advance that it actually owns the property it is selling to a buyer.

“What we actually own is an IOU from our broker-dealer–a contractual right to the shares instead of the real thing. Your broker, in certain circumstances, has the right to conjure and sell you IOUs to more shares than actually exist,” says Forbes.

The US legal system made a policy decision to favor liquidity over solvency–to favor negotiability of securities over keeping accurate and timely records of who really owns what.

Patrick Byrne brought naked shorting to the attention of regulators but was ridiculed and eventually paid off with a winning settlement to lay low.

After the events of the ‘meme stock’ frenzy in 2021, retail investors came together and scrutinized the SEC, DTCC, and FINRA for allowing blatant market manipulation to occur.

Retail investors were momentarily prohibited from trading shares of AMC and GameStop due to liquidity concerns within several market makers and brokers including Citadel and Robinhood.

The DTCC waived billions of dollars in collateral to reset the game for the big players, cheating retail investors out of their money.

“The problem is that “overissue” of securities suppresses market prices. This is one of many subtle ways that value is skimmed from Mom and Pop investors in securities markets.” – Forbes.

Market News Published Daily

Market News Today: The SEC green-lighted naked shorting in 2015.
Market News Today: The SEC green-lighted naked shorting in 2015.

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

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