NSS ~ Counterfeiting Stock ~ MM Games Played

[fourkids_9pets]

CTIX >> kudos to FarmaZutical

for this post .. which *educates* as to methods in play re: various colluding entities' playbooks ..

Which alternative the manipulator pursues depends on whether he wants to conceal his behavior and his aversion to detection risk. He can reduce this risk by achieving a pooling equilibrium but must sacrifice some of the potential profit from more aggressive manipulation. Departures from a pooling equilibrium (e.g., more aggressive naked shorting) are more likely when the manipulator registers as a market-maker to avail himself of the short sale rule exceptions and also when he succeeds in driving the share price below one dollar to push the stock into a less regulatory intensive market, such as the OTC Bulletin Board. Driving the price down enough to trigger delisting provides a natural cover for the manipulation because it signals a deterioration in the firm’s financial condition and its prospects to those market participants who are unaware of the fraud.71 The type of behavior modeled in this section is more likely to occur in the OTC Bulletin Board market than on the exchanges or in the Nasdaq National Market. It might take the form of trading by investment ‘pools’ (informal investor networks) that have enlisted the cooperation of one or more market-makers, who reduce the risk of detection because of the market-maker exceptions to the short sale rules. These pools could reduce the risk of detection by spreading the 70 The weaker short sale restrictions on the OTCBB, including under Regulation SHO, indicates the difference in regulatory environment. 71

This pattern of behavior is documented in the SEC’s enforcement action against manipulative short sellers in SEC v. Rhino and Badian (SEC, 2003a).

Link: https://www.sec.gov/comments/s7-08-08/s70808-318.pdf

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