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Naughty boy! Some people are really desperate to make money, the illegal way!

May 31, 2011
Trader admits to stock market manipulation

He used real-time data to turn quick profit from buying, selling warrants
By Khushwant Singh, Court Reporter

A TRADER pleaded guilty yesterday to manipulating the stock market.

Sim Tee Yang had access to real-time data, including bids and asking prices, through his job with CIMB-GK Securities.

He used this information to quickly sell large quantities of a certain share. This pushed down the price of warrants, which are financial products linked to shares.

Sim snapped up the warrants at the lower price. He then pushed their value back up by buying shares, and sold the warrants for a profit.

The 44-year-old worked as a proprietary trader for the securities firm, a district court heard. This means he was trading with the company's money as opposed to customers'.

Profits would be shared equally between him and his employer.

In 2005, Sim started buying shares in CapitaMall Trust, which was traded on the Singapore stock exchange. The price of these shares was closely linked to the price of CapitaMall warrants.

According to one of the charges, he sold 37,000 shares in 47 seconds. This caused the price of the warrants to dip by three cents.

Seconds later, he bought 180,000 CapitaMall warrants.

Sim waited two minutes, then started buying CapitaMall Trust shares, driving the price up from $2.34 to $2.38, and increasing the price of the warrant from 53 cents to 55.5 cents.

He then repeated this trick. By the end of the day, he had made a profit of $3,840.

Sim used the trick again on 11 other days.

Between May and August 2005, his profit was $16,511.

The court heard that CapitaMall Trust had been listed and traded on the Singapore stock exchange since 2002.

When the offences were committed, its portfolio consisted of shopping malls such as Tampines Mall, Junction 8 Shopping Centre and Funan DigitaLife Mall.

The CapitaMall warrants were issued by Calyon Financial Products.

Its Hong Kong office would issue the market quotes for these warrants to brokerage firm CLSA Singapore.

CLSA would then transmit these quotes to the Singapore stock exchange trading platform.

Sim had access to this real-time data, and used it to help him commit his crimes.

The trader pleaded guilty to four counts of market manipulation.

Eight charges will be taken into consideration when he is sentenced on June 21.

Deputy Public Prosecutor James Lee told the court that on the days when Sim manipulated the market, he was responsible for between 97 per cent and 100 per cent of the trades in CapitaMall warrants.

Defence counsel Andy Yeo said he would need three weeks to prepare the mitigation because of the complicated nature of the case.

Sim, who wore a business suit in court, is out on bail of $100,000. He can be fined up to $250,000, jailed for up to seven years, or both.
Some examples tat I got from wikipedia

Pools: "Agreements, often written, among a group of traders to delegate authority to a single manager to trade in a specific stock for a specific period of time and then to share in the resulting profits or losses."[3]
Churning: "When a trader places both buy and sell orders at about the same price. The increase in activity is intended to attract additional investors, and increase the price."
Runs: "When a group of traders create activity or rumors in order to drive the price of a security up." An example is the Guinness share-trading fraud of the 1980s. In the US, this activity is usually referred to as painting the tape[4].
Ramping (the market): "Actions designed to artificially raise the market price of listed securities and to give the impression of voluminous trading, in order to make a quick profit."[5]
Wash trade: "Selling and repurchasing the same or substantially the same security for the purpose of generating activity and increasing the price"
Bear raid: "Attempting to push the price of a stock down by heavy selling or short selling."[6]
There are many speculators who trade both the derivatives and underlying instruments. Where is the line between trading and manipulation?
After all the effort, the prop trader managed a profit of $3,840 in a day (probably his best trade) and $16,511 in 4 months (monthly profit of $4,128). Note that profits would be shared equally between him and his employer. These are not eye-poping figures.
For retail traders, commission will erode all the profits. Our internet connection may not be fast enough to execute the trades.
CapitaMall Trust is neither an illiquid nor a small cap stock. To so-called manipulate the price requires a huge sum. The problem lies with the derivatives. They are mostly small in issue and illiquid. The exchange promotes them, the issuer manufactures them, and the market maker earns his spread in an ordinary day. Excellent synergy.

In this "manipulation", the only loser appears to be the market maker. Whether he quoted manually or with the help of an algorithm, the market maker was "tricked". The ecosystem was disturbed.

A crying baby must be attended to. And someone must be punished for making the baby cry.

To me, the root cause lies with having the derivative market. It should be scrapped. (It's actually cheaper to go MBS or RWS.)
Quote:Deputy Public Prosecutor James Lee told the court that on the days when Sim manipulated the market, he was responsible for between 97 per cent and 100 per cent of the trades in CapitaMall warrants.

To add. It is impossible to be responsible for 100% of the trades unless he is on both the buy side and the sell side at the same time.

For every buy order there has to be a matching sell order to make a trade.

Lastly, I wonder what it will be called if his operation had not been profitable...