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Citibank bear raid... - 12/21/2011 6:39:35 PM

tazzygirl

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http://arxiv.org/PS_cache/arxiv/pdf/1112/1112.3095v1.pdf

Evidence of market manipulation in the financial crisis

We provide direct evidence of market manipulation at the beginning of the nancial crisis in November 2007. The type of market manipulation, a "bear raid," would have been prevented by a regulation that was repealed by the Securities and Exchange Commission in July 2007. The regulation, the uptick rule, was designed to prevent market manipulation and promote stability and was in force from 1938 as a key part of the government response to the 1928 market crash and its aftermath. On November 1, 2007, Citigroup experienced an unusual increase in trading volume and decrease in price. Our analysis of financial industry data shows that this decline coincided with an anomalous increase in borrowed shares, the selling of which would be a large fraction of the total trading volume. The selling of borrowed shares cannot be explained by news events as there is no corresponding increase in selling by share owners. A similar number of shares were returned on a single day six days later. The magnitude and coincidence of borrowing and returning of shares is evidence of a concerted effort to drive down Citigroup's stock price and achieve a profit, i.e., a bear raid. Interpretations and analyses of financial markets should consider the possibility that the intentional actions of individual actors or coordinated groups can impact market behavior. Markets are not sufficiently transparent to reveal or prevent even major market manipulation events. Our
results point to the need for regulations that prevent intentional actions that cause markets to deviate from equilibrium value and contribute to market crashes. Enforcement actions, even if they take place, cannot reverse severe damage to the economic system. The current "alternative" uptick rule which is only in effect for stocks dropping by over 10% in a single day is insufficient. Prevention may be achieved through a combination of improved transparency through availability of market data and the original uptick rule or other transaction process limitations.

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RE: Citibank bear raid... - 12/21/2011 8:41:23 PM

tweakabelle

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These people are such animals. They'd try to turn a profit from their mothers' funerals if they could.

And the very same people who indulge in this type of manipulation invariably argue for less regulation of markets. An imbecile could join the dots couldn't they?

Why do we allow these parasites to continue their insidious operations?

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RE: Citibank bear raid... - 12/21/2011 8:43:12 PM

tazzygirl

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Because, by law, they were allowed to do what they did.

a "bear raid," would have been prevented by a regulation that was repealed by the Securities and Exchange Commission in July 2007.

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RE: Citibank bear raid... - 12/21/2011 8:47:43 PM

tweakabelle

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quote:

ORIGINAL: tazzygirl

Because, by law, they were allowed to do what they did.

a "bear raid," would have been prevented by a regulation that was repealed by the Securities and Exchange Commission in July 2007.

Yes. Exactly. Yet some fools still argue the case for even less regulation of the 'markets' ..... Go figure.

It always seems to be instructive to ask: 'Who profits?' doesn't it?

< Message edited by tweakabelle -- 12/21/2011 8:48:00 PM >

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RE: Citibank bear raid... - 12/21/2011 8:49:32 PM

tazzygirl

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Of course they do.... they didnt lose enough this last time.

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RE: Citibank bear raid... - 12/21/2011 8:50:29 PM

willbeurdaddy

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Too bad the report is highly speculative and ignores obvious market news from the very day that they claim "manipulation":

"In a matter of minutes Thursday morning, Citigroup, the global banking giant that Mr. Prince leads, lost more than $15 billion in market capitalization, as its stock tumbled more than 7 percent in the first half-hour of trading. One catalyst for the sell-off, which brought Citi’s shares to their lowest point since May 2003, seemed to be a pessimistic report from Meredith Whitney, a financial-services analyst from CIBC World Markets. In her report, Ms. Whitney said Citi could be forced to cut its dividend or sell assets to stave off what she said was a $30 billion capital shortfall.

The full report and analysis are available after the jump.

Citi’s balance sheet was also among the concerns cited Thursday by Susan Roth Katzke, an analyst at Credit Suisse who cut her rating Thursday on Citi’s stock to “neutral.”

The reports and the market’s reaction, coming just days after Merrill Lynch‘s big third-quarter loss and the sudden exit of its chief executive, highlight what a tumultuous time it is to be the head of a large financial institution.

(You can download the CIBC report as a PDF file here.)

Until Merrill’s shake-up took the spotlight, many on Wall Street were wondering how long Mr. Prince could keep his post atop Citi, which posted a 57 percent decline in earnings in the third quarter.

Thursday’s drop in Citi’s stock also shows how jittery investors have become. Wall Street seems more inclined to sell first and ask questions later, especially after the recent bombshell from Merrill, in which it reported a much-bigger-than-expected writeoff than it had previously forecast. That debacle was followed by the swift resignation of Merrill’s chief, E. Stanley O’Neal."

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RE: Citibank bear raid... - 12/21/2011 8:59:51 PM

tazzygirl

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Changes in investor behavior are often explained in terms of specic news items, without
which it is expected that prices have no reason to change signicantly [13, 14]. The press
attributed the drop of Citigroup's stock price on November 1 to an analyst's report that
morning [15, 16]. This report, by an analyst of the Canadian Imperial Bank of Commerce
(CIBC), downgraded Citigroup to \sector underperform" [17]. Any such news-based expla-
nations of investor behavior on November 1 (similarly for November 7) would not account for
the dierence in behavior between short sellers and other investors. Under the assumptions
of standard [14] capital asset pricing models, all investors act to maximize expected future
wealth [18], and should therefore respond similarly to news. Furthermore, it has been shown
empirically that the ratio of short sales to total volume remains nearly constant, even around
news events [19]. In the literature, analysis of the residual small dierences in the behavior
of short and long investors has been interpreted to indicate that short sellers have an infor-
mational advantage or that short sellers are able to anticipate lower future returns [19{23],
rather than cause them. Still, these studies do not show that large dierences in trading
generally occur between short and long sellers. Thus, the existence of such a dierence is
indicative of specic trader action.

This doesnt copy well but the report does address the CIBC downgrade.

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RIP, my demon-child 5-16-11
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RE: Citibank bear raid... - 12/21/2011 9:01:33 PM

tazzygirl

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... double post...

< Message edited by tazzygirl -- 12/21/2011 9:02:05 PM >

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