According to a March 18, 2013 Wall Street Journal article titled “'Wash Trades' Scrutinized; Issue Is Whether High-Speed Firms Illegally Buy, Sell Futures in Same Deals,” “U.S. regulators are investigating whether high-frequency traders are routinely distorting stock and futures markets by illegally acting as buyer and seller in the same transactions, according to people familiar with the probes.” (found here)
We’re not sure what really prompted this action, however, the New Low Observer has been tracking these issue for a very long time (since 2008). In an August 2009 article titled "After Hour Conundrum" (found here), we said the following:
"My suspicion is that institution(s) are accumulating short/long positions as the price of the stock rises during the regular hours. Once the market closes, the same institution sell/buy the shares to/from themselves or a related party. Additionally, options for the stock could have been purchased, sold or written in anticipation of the expected change in price after-hours."
An activity that has been going on since 2008 and was easily identifiable begs the question, Why now? We’ve become inured to the claims that regulators are going to take action on issues that are deemed illegal, especially when said illegal activity is so widespread.
We have extensive records of wash trades from 2008 to the present. The playground for such illegal activity is in the pre-market and after hour markets. Our February 2013 article titled “Investors Pay Big for Loss Protection” (found here) said the following:
“At some point, there will be a mass of pre/post market participants that will cause a stampede for the narrowest exits on a much broader scale that will put into the question whether what remains of the current system actually works.”
In the past, we’ve asked that regulators address this fraudulent activity before it is too late. However, when regulators actually start to get involved it usually too late. Let’s see how this plays out.
Note: A partial depository of after hour shenanigans is highlighted in the link below: