Sprott Physical Silver Trust' - PSLV $26.8 oz. 6/11/20
Manipulation by Market Makers is an really an overstated term that carries feelings of exploitation and down right fraud, but in reality, Market Makers are not companies that appear like one night stands and then disappear, quite the contrary.. Market Makers are responsible to make a market and to meet the needs of those they are responsible for, companies, shareholders and institutions and it is to these entities where they may try to influence the best market executions.
If the Market Maker was to keep the price steady on the release of news they would find themselves with lots of buys or sells which they had no choice but to fill at the screen price (what you go by and this is their obligation, but before they could find matching orders (for every buyer has to be a seller and visa verse) they would have to change the price and they would then loose money through market exposure. This is bad for them and for us.
So what happens if there are all sells and the price is going up? Well the explanation is that the Market Maker had an order to fill and no stock to fill it with (this trade would not have shown up on your screen until somewhat later, which are referred to as delayed trades). Under their obligations to create liquidity in the share, the Market Maker is obliged to gather an inventory (Stock holding), but only until they can meet the above obligation. This is only possible if they can encourage people to sell, which can be achieved by raising the price...The order is likely to have been large enough allowing the Market Maker to gather a decent premium on the price. So once the order is filled and the market volume returns to their normal levels, so does the share price. You can see this through the daily highs and lows along with the volume at these particular trades in time or in sequence.
You've heard the term on these message boards all too often "shaking the tree". Well that is when the MMs moving the price up, which will encourages sells, moving it down also encourage sells. Another look is that the price was hiked way up despite the support level and few of the people who got in are now going to sell.. The rise was artificial and the real traders in the know just ignored it as it only lasted about 2 hours, but what was caught were investors who were in way before the spike and had forgotten about it, now they want out. Volume is a big part of this and sometimes folks ask "why the volume".. So the Market Makers order gets filled, the price settles back to a support level and volumes decrease and it starts all over again. This scenario is where shorty likes to hang his hat.
The above reason is why you should never put a pennystock in your sockdrawer and daily monitoring is an absolute must. You have heard me post such reasons and should be part of every persons understanding and why the term "long" makes no sense and will only have you losing money.
Can you track such activity? So So and there are all sorts of tricks and one is mainly to reduce the volatility.. Sometimes this is mostly done by increasing the bid/offer spread therefore discouraging trading especially by day traders and also by marketing the companies shares, Loansharks as referred to equity financing (dilution) in the hope they will take up long term positions.
There are a couple of areas that MMs try to encourage liquidity and one is all to apparent. .Notice on the boards when posters beg the company to release news any news, well the MMs need this one venue to increase the liquidity and such encourages the companies to produce news releases, whether substantial or not.. It does create interest if you know what I mean.. The other area is by narrowing the spreads.
You ask if this practice is legal, well sort of and then not. See Market Makers are not supposed to allow themselves to go short, but in the process of making a market they may well find themselves short of a stock. If this happens a Market Maker has a number of options, purchase from another Market Maker, which they do quite often and it is allowed or play with the price in the hope that enough sellers will embark to cover the short or borrow the shares. The institutional borrowing, which happens on larger exchanges is much practiced, but in pennies is unlikely since institutions don't hold pennies unless it is from offshore loansharks and then they just speed up the dilution process to cover and of course a manipulated PR to help in this angle.. If that's illegal? Well my friends, this has been going on since the dark ages.
Thus you have your day-traders and their only means is to make money on the heels of the MM's, not your long-term holders, they will never recoup and that I'm sure of.
The key to trading pennies is timing and one must have an understanding of how the market markers play.. One rule that will always apply and that is the 3 day rule.
Never buy an issue on a 3rd day uptrend in pennies and sell on that return reverse of a swing on that 3rd day or the outside of the 4th day.. After that, if it hasn't gone beyond the lows before the uptick is the time to dump. In other words, never chase a stock.
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Things have drastically changed with respect to CDEL over the last 3-5 years.
I know CDEL and what they consist within the pennyarcade and the overall trading sessions.
CDEL is a very large institution that comprises of many facets. First and foremost, they have the largest electronic trading platforms that is larger than Nasdaq.
They control over 35% of the volume that is traded through their systems and why you see them always ping ponging along with NITE.
Their only competition in handle large volume trades is NITE. When some of you came back and mentioned they are retail and doesn't do dilution or convertible/toxic debt financing is not accurate. They are one of the largest purveyors of shorting, conversion on convertible notes and yes Toxic Debt instruments. Not to mention that options trading is their bread and butter and they are the largest in the world in this venue.
Second, CDEL runs one of the most successful global hedge funds and is very large in institutional buying and selling that far exceeds general retail outside of their electronic volume handling.
Someone mentioned about the 5th decimal yesterday, that there were some trades going through on the 5th decimal. That folks is institutional buying, not retail!! And it was CDEL that handled that part. Of course it may also be trading among themselves to handle so called mask trades, which we see a lot of. This is simply a share amount like CDEL does a lot and notes only a 5,000 share count but seems never to leave.
CDEL was in front of all the trades. CDEL and most of their business is institutional. When some of you see CDEL who executed, is only because their Electronic Trading platform got routed, but their retail is for mostly their clients, but dwarfs compared to institutional.
This MM CSTI, is the problem with this shorting.
Also, let me mention that CSTI who is the second player along with NITE and is a European MM out of the UK and is allowed to short pennystocks. In the states where shorting pennystocks isn't allowed is where this MM (CSTI)is running interference for NITE.
However CSTI isn't really playing in this sandbox, but that will change once we get that catalyst
Most of the popular penny stock MM route through NITE because they are quick to execute most orders, but CDEL is very much in this venue and competes with NITE
Each market maker has it’s own complex algorithm that tries to make trades and CDEL is considered to be the worlds finest.
Many times they do this by shorting the ask and then covering on the bid. It is here with respect to CDEL, CSTI and NITE bounce back and forth and what we have been witnessing in the last many sessions.
Sometimes when a stock is running and you place an order on the ask and you don’t get filled, it is actually the market maker taking shares on the ask.
Then they move up the bid and again is where CDEL shows up and NITE trails. Then on the ask and tries to bait traders into hitting the ask again to sell the shares that they just bought. This happened a lot and resulted in a deep slide and took out the emotional holders of which, I believe were not the Level II traders, but saw the quote and WOW!! panicked.
You will also see MM’s shorting a stock as it runs up because they know that it will eventually come down. Think of it this way. If they are able to short a stock at .17 and it runs to .19, you will hear people on the forums, or a market maker is short.
In reality, it really won’t matter because naked or shorting really isn’t enforced in Europe and Canada where it is legal and any short will eventually be able to cover, if then they just keeping shorting more. Here is where I believe CDEL played and accommodated emotional traders into selling.
So far every indication that the share structure hasn't changed and the O/S shares the float is in strong hands appears CDEL is a major buyer at this time.
The problem we have here is CDEL is playing counter weight.
Have a good day
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