On May 6, 2010 The stock markets plunged for apparently no reason. Most of the hard selling was concentrated in larger sable blue chip companies and that seemed very suspicious especially as some dropped from double digit prices to a penny and other like Proctor and Gamble fell a third of their opening value. It happened out of the blue. The immediate response of the markets and financial media was to blame the crisis with the Euro and The Greek financial meltdown but hint hint…this crisis happened during US market operating hours as European markets slept. The next explanation that emerged in the financial media was that there had been a “computer trading error” Citgroup was mentioned and someone was said to have had a “heavy finger” pressing down on a presumed “sell button”. There are no such buttons for selling large blocks of stock. Companies and individuals who control large blocks of stocks don’t try to spook the market and cause fear or panic when they want an adequate price for the shares they wish to sell. The explanation only adds to the suspicion of stock market manipulation going on on a grand scale even. The markets actually functioned as prices fell from over $50 on some stocks to a penny and others fell by a third of their value. Those prices did not last very long they were quoted and a few orders were filled and then most of the prices corrected to a more reasonable discount. It looked more like computer manipulator error exposing something that is not supposed to be going on instead of a computer error. Automatic computer trading programs that are legitimate are designed to act more like market specialists. Some have computers that figure out a statistical average range for prices and trade discrepancies in disjunct markets where securities trade independently at slight different price ranges. Computer trading programs are not designed to loose money because they hedge their bets. It is possible that computers malfunction and there have been cases where they have. This episode still looks like some kind of manipulation going on. The 2008 Stock Market Crash also had attributes that looked like manipulation that have not been proven yet. This episode on May 6, 2010 maybe a window on some unsavory activity in the financial markets that is not only illegal but may have been used for political gain in the last election where giant companies that were solvent enough to be transfered in ownership were essentially destroyed by market selling pressure. These included Bear Sterns, Lehman brothers, Washington Mutual. The author does not believe that sort selling is a form of market manipulation but does wonder how the shorting was leveraged up to the degree to cause complete market collapse. Corporations blow up all the time from lack of liquidity and the markets are merciless in tearing what is left down but in the 2008 market crash companies that that were insured by federal deposit insurance were having panic runs to withdraw account funds. Arguing that collapse could have been avoided is not the point but wondering if the forces that did cause the collapse may not have been the product of good old fashioned market manipulation still is a question begging to be answered.
There are multiple markets world wide where the same securities trade simultaneously or at different times of the day. Professional traders can make money trading the various differences on these various exchanges and use other new electronic markets , such as the dark pools, where that act as parallel universes for trading. Information in the electronic markets and trading price data is not necessarily something that ordinary stock market investors get to see trade quotes on the ticker coming out of. Some online brokerage firms use some of these electronic trading areas to execute trades instead of going to the floor of the NYSE or in direct access to the other market. All markets are now computers linked to computers rather than floor book keeping.s Some of the less accessible computer exchanges are definately Grey trading areas. Traders can now trade at the speed computers think rather than the speed humans can which is sometimes the explanation of market glitches.
Rapid trading on multiple markets can allow traders who might be manipulating the system the ability to create shares out of thin air and then trade them acting as both buyer and seller simultaneously or doing this with co-conspirators seemingly acting independently. The only reason to do this would be to drive price up or down creating market fears of the millions of market spectators watching ticker data. A sophisticated computer hacker knows that not only human beings can have their identity stolen but virtually any noun can so long as it has a unit identification number. Investors are unaware that shares they hold in book value can actually be used by the firms holding those securities as the chips to write options and futures contracts off of? The stock can be borrowed so long as it is not being sold by the owners for a profitable side business that helps brokers exploit their net street name assets? Manipulators especially of the computer hacker financial wiz kind can go way beyond that just by stealing the identifying numbers of security units and blocks of stocks, bonds, derivatives–anything with an identifying number. Its actually not stealing but borrowing because at the end of the trade they would have to make whom ever they borrowed the identification numbers from whole again by returning them. Large corporations holding shares, brokerage firms, individuals who own securities and neither use them to buy nor sell usually only see a net asset statement once a month or if online they can check it everyday. Just because someone steals the numbers or borrow them does not mean anything has to actually be taken out of any specific account. Imagine then how a computer finance hacker could manipulate markets creating fear trading phantom stocks by the numbers, even un issued stock with numbers, share the gains and losses that cancel each other out with their co-conspirators and cause pandemonium on markets with rough stock price swing volatility much more often than it used to be. If I were going to try to manipulate the markets using computer technology and computerized markets that would be the best way to do it. The human element not the computer is what gets spooked like horses. The manipulation would be a zero sum game of between co conspirators or the same person or entity doing the ultimate no profits hedge just to use psychology to move the markets. This is what May 6, 2010’s market plunge looks like to me. No market error. No computer error. Manipulator error where they either almost got caught or will? Maybe? It would be especially hard to prove if the zero sum trading goes on between co-conspirators where nothing seems to link them as sharing the profits and losses to cancel out trades that are only designed to create psychological fear. Their trading on that fear once it happens…well thats their business and perfectly legal. One way co-conspirators could share the profits and looses would be to take every other loss and every other gain. Still hard to prove but definately possible. Law enforcement might need emails to link the co-conspirators but smart ones are not going to leave any trace.
How did the markets expose possible manipulation on May 6, 2010? The error may have been to allow the trades to get diverted to larger exchanges leaving the opportunity for others not involved to accidentally be able to part of a manipulation tactic? When the markets announced that they were canceling those trades that day it bothered professionals just as much as the sudden unexplained price drops. What if markets canceled trades going back 2 to 40 years? Thats not right. The cancellation of trades also creates more suspicion that someone may have rigged the markets on the part of people who don’t understand these markets? Chances are the markets are not rigged but the manipulators are after not just human psychological bounty but that the sudden price drops trip up automatic computer programs. It probably does not cause them to run amok but does change the average trading price on a larger scale just because there is a new statistical norm for computer trading algorithms?
Identity theft of computer identifying numbers for units of stocks bonds and derivatives is probably just as red hot a crime area as identity thief of social security numbers. There must be multiple strategies used. There maybe some very quiet computer hacker billionaires out there assuming they can use numerical identity theft to manipulate the finances much bigger than anyone’s social security linked assets. There are companies out there with market caps well over 200 billion dollars. Imagine if they figured out how to do this with bank assets that have identifying account numbers in a world where banks can have multiples of a trillion dollars in assets or just in currency exchange markets. Dollars, Euro ,Yen , etc traded have to have identifying numbers to distinguish one online dollar form another one or one Euro from another one. There is a point where faith in the number of dollars on the exchange is not enough to believe they actually exist outside of cyber- space. Going back to the stock market crash and banking panic of 2008 it really does make one wonder what really happened and if manipulation by hackers was not involved then? The May 6 2010 event is suspicious enough to worry. The biggest worry is if numbers can be “borrowed” to give manipulators the leverage to move market volume at no cost or very low cost to them and if this borrowing of numbers is a form of identity theft of the identifying numbers. Are tactics like these being used for social and political purposes like to influence elections? Was there an attempt that went bad by manipulators on May 6, 2010 to cause a market correction that they could make money on at a different level and maybe on multiple markets? It is interesting how quickly the media had the perennial bears back on television some selling their new books and then by coincidence the “V”Shaped recovery is being challenged. Surely the manipulators know all about timing? It was sell in May time too. Of course all of this is just suspicion. Vague suspicion. I am accusing no one of anything but still wondering.