"2569 Federal Register / Vol. 72, No. 12 / Friday, January 19, 2007 / Notices
4632. Transaction Reporting
(a) When and How Transactions are reported
(1) Trade Reporting Facility Participants shall, within 90 seconds after execution, transmit to the NASD/ Nasdaq Trade Reporting Facility or if the NASD/Nasdaq Trade Reporting Facility is unavailable due to system or transmission failure, by telephone to the Operations Department, last sale reports of transactions in designated securities executed during normal market hours. Transactions not reported within 90 seconds after execution shall be designated as late.
(2) Transaction Reporting to the NASD/Nasdaq Trade Reporting Facility Outside Normal Market Hours
(A) Last sale reports of transactions in designated securities executed between 8:00 a.m. and 9:30 a.m. Eastern Time shall be reported within 90 seconds after execution and shall be designated [as ‘‘.T’’ trades] with the unique trade report modifier, as specified by NASD, to denote their execution outside normal market hours. {Transactions not reported within 90 seconds also shall be designated as .T trades.} Such {T} transactions not reported before 9:30 a.m. shall be reported after 4:00 p.m. and before 8:00 p.m. {as .T trades} with the appropriate trade report modifier as specified by NASD. 8:00 a.m. and 8:00 p.m. Eastern Time and be designated ‘‘as/of’’ trades."
So... since the Pinksheets doesn't allow for pre-market or post-market trades, any stocks traded exclusively on Pinksheets that contain the "T" indicator on a trade, is a trade that did not meet the NASD 90 second posting rule. If the "T" trade appears at the beginning of the day it is because it wasn't posted at Pinksheets before 5PM on the preceding day.
There are many conspiracy theories that go around about how T trades ALWAYS indicate some kind of massive dilution by the company in question (not talking specifically Hemi here)... and some DO make that assumption about Hemi. However, with only 100MM shares in the A/S to begin with, this seems doubtful, IMO. There are also theories that these T trades indicate shares being bought by MMs themselves (not specifically referring to Hemi). But why would MMs be buying? It's been known for quite some time that there's a very large naked short position with HMGP, and seeing as how most of the T trades we see, and have seen all along, are very close to, or even below the low price of the day, this would seem like the most likely scenario, as the MMs would want to get as low a price as possible to still make a profit on their shorting practices.
The NSS has gone on for a very long time (just watch AUTO, and it's a pretty sure bet since most days AUTO is only on the ASK and rarely on the bid, that the NSS is going on via AUTO)... But the T trades have also gone on for about as long. What makes more sense is that the T trades were the other end of the deal. The naked shorting is occurring on the Ask on the front end, and the T trades are the "other end" because that's where an MM could be acquiring the shares to cover the shorts. SO it seems to fit that the reason the T trades continue, is the apparent NSS has continued, both for essentially the same time frame. It's just my own opinion and theory, but it fits with a lot of popular view points on the subject in general.
But the most fundamental answer to your question, is that T trades are trades that didn't get posted within 90 seconds of occurring, thus requiring the "T" designation when reported. The "T" designation shows up when you view the Time & Sales for the day. It's INTENDED purpose, is listed in the quote from the rules I posted above, but some would contend that it's also used for psychological purposes, as it tends to be thought of as something negative in a stock, and when it seems to occur long-term day after day, it tends to lend itself to fear and doubt over a stock. Since the rules say these MM transactions should be posted after 4PM, I think the T trades are simply that, and any psychological effect is just a side benefit from the MM point of view.
Since "manipulation" has been a topic associated with THIS topic, and discussed before, I suppose just for clarity I should mention it also. The "manipulation" comes in on what I called the "front end"... AUTO doesn't come up with those naked short shares on their own. There is/was an entity that had AUTO selling the naked short shares for them. AUTO doesn't necessarily have to know they are NSS for this to occur. I'll refrain from further comment at this time on whether or not this was the case with HMGP shares. But just in the existance of those naked shares, it "manipulates" the share price by causing the appearance of a huge abundance of shares for sale.... and the laws of supply and demand kick in with a low share price. When only "REAL" shares are trading, the true supply is actually extremely tight. Even if what's left of the A/S got dumped on the market, the supply would be relatively tight, and the SP would respond to the laws of supply and demand, and move upward.
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