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Part 1

Declines in the CuDeco share price occurred during 2013, mostly because of
the selling down of a substantial holding by the M&G Group.
The disposal was managed as a fire-sale on-market, with little attempt made
to maximize the proceeds of the sale.
As shown by the following chart, prices declined before the sale, during the
sale and showed minimal recovery, even after the holding was reduced below
5% where it was no longer subject to substantial shareholder disclosure rules.
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In all cases of non-genuine trading, it was institutional algorithms that were responsible for anomalous trends.

Examples of Non-Genuine Selling by CommSec

CuDeco Share Price Chart - September 16, 2013


Crossings
3

A comparison of broker selling profiles shows reveals COMM as the dominant seller but with a trading bias
towards non-genuine selling.

CuDeco Broker Selling Profiles The level of Institutional activity is revealed by


comparing retail sales, as provided by the register, to
45% 5 December 2014 CommSec selling in the market. The difference reveals
40% A bias towards non-
a dominant institutional presence.
35% genuine selling by
CommSec Breakdown of CommSec Selling
30%

25% % of Downtick Trades


% of All Selling
20% COMM Retail
CommSec
15%
Institutional Sales 26%
10% 74%
5%

0%

CuDeco – 17 September 2013


Trading
Price increases on 17 September 2013 were vigorously opposed by selling by CommSec. The selling
originated from the institutional desk.

CuDeco Share Price Chart - September 17, 2013


218
216
214
212
210
Prices

208
206
204
202
200
198
CommSec (COMM) Downticks
0
-0.5
Price Falls

-1
-1.5
-2
80% of COMM DT trades were for less than a marketable parcel and averaged $309 per trade.
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A comparison of broker selling profiles again shows non-genuine selling by CommSec was the
dominant feature of trading.

CuDeco Broker Selling Profiles The level of Institutional activity is revealed by


comparing retail sales, as provided by the register, to
50% 17 September 2014 CommSec selling in the market. The difference reveals
45% a dominant institutional presence.
A strong bias towards
40%
non-genuine selling
35% by CommSec Breakdown of CommSec Selling
30%
% of Downtick Trades COMM Retail
25%
% of All Selling
20% CommSec 21%
15% Institutional
Sales
10%
79%
5%
0%

The dominant institutional influence


functioned as a non-genuine seller.

CuDeco – 18 September 2013 Trading


On 18 September 2013 prices slumped at the open before pushing to the day’s high. Prices were then
subdued over the remainder of the day mainly because of the effect of COMM institutional algorithms.

CuDeco Share Price Chart – 18 September 2013

225

220
Prices

215

210

205

0
Price Falls

-1
COMM algorithms functioned as a non-genuine seller across the entire day’s trading
-2
76% of COMM DT trades were for less than a marketable parcel and averaged $307 per trade.
5

A comparison of broker selling profiles shows non-genuine selling by CommSec was accompanied by
non-genuine patterns of selling by JP Morgan and Credit Suisse.

CuDeco Broker Selling Profiles The level of Institutional activity is revealed by


comparing retail sales, as provided by the register, to
40% 18 September 2014 CommSec selling in the market. The difference reveals
35% a dominant institutional presence.
A strong bias towards
30% non-genuine selling
by CommSec Breakdown of CommSec Selling
25%

20%
CommSec COMM Retail
15%
Institutional 30%
10% Sales
70%
5%

0%

The dominant institutional influence again


% of Downtick Trades functioned as a non-genuine seller.
% of All Selling

CuDeco – 16, 17 & 18 September 2013 Trading Overview

The share flows don’t take into account flows related to stock lending. As a result the short fall in trading
is like to be much greater than 1.7 million shares.
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CuDeco – 16, 17 & 18 September 2013 Trading Overview cont’d

Identifying wash trades would require audits of the brokers who were large net sellers and large net
buyers as well as those brokers who churned stock.
The focus needs to be on determining which broker or brokers were buying for the same entity or
entities who were selling shares through Deutsche Bank and CommSec.
The netting out effect of such trading would account for the missing trades and to what extent wash
trades dominated trading.

CommSec’s selling over the 3 day period


requires particular scrutiny. Breakdown of CommSec Selling
Institutional trading is an estimate based on the
knowns of ASX selling and retail sales.
Retail Sales Institutional Total CommSec COMM Retail
322,012 906,623 1,228,635 Institutional 26.2%
Sales
73.8%
Full regulatory scrutiny is required in view of:
 the large number of missing trades ,and
 a strong tendency by CommSec
algorithms to conduct trades in the
manner of the manne of a non-genuine
seller.
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CuDeco – Efficient Selling during the period Sept 26 through Oct 8, 2013
CommSec’s dominance in causing price falls on September 16, 17 and 18, as a non-genuine seller, is in
contrast to efficient selling during the period September 26 through October 8.

COMM featured as
an efficient seller on
other days as well.

The ability to adopt different styles of


selling is made possible through the
tuning of algorithms. It enables trading
agendas to be implemented.
Not all trading agendas are in the
interests of fair trading.
Trading data suggests that the investment
bank brokers exercise cartel-like levels of
control over the setting of prices.
 Without audits It is not possible to
identify those entities who buy and
sell across multiple brokers i.e.,
actions that compromise market
integrity.
 Without audits it is not possible to
identify where collusion is taking
place.
Abuses of algorithmic trading and short
selling make for a toxic market place.
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CuDeco – Missing Trades during the Period Sept 26 through Oct 8, 2013
Registry anomalies that show large numbers of missing trades at settlement were also of concern in
the period September 26 through October 8 where CommSec traded as an efficient seller.

Non-genuine selling trends


combined with registry
anomalies seriously
question market integrity.
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A further concern for market integrity concerns the tendency of other investment bank brokers to take over as
non-genuine sellers in CommSec’s absence. The daily trends are highlighted in the charts that follow.
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Part 2

Additional trading by CommSec following the M&G fire-sale, and where


algorithms run by their institutional desk were tuned in the manner of a non-
genuine seller, are highlighted in the slides that follow.
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CuDeco – 9 October 2013 Trading

Trading on October 9, 2013 again shows CommSec algorithms being used to artificially control prices.

CuDeco Trading - Price Chart 9 October 2013


205

200

195

190

185 The intensity of DT trades


increased as prices increased
180

175

CommSec (COMM) Downtick Trades by Size of Price Fall


-0.5
-1.5 Cents
CommSec algorithms caused adjustments to prices in the manner of a non-genuine seller.
-2.5

25 K
All CommSec (COMM) Sales by Volume

20 K Streams of tiny
algorithmic sell trades

15 K
Involving many
10 K DT trades as
above.

5K

CuDeco Broker Selling Profiles 66.7 % of CommSec DT trades were less than a marketable
parcel averaging 143 shares in size. Moreover, 91 % of DT
60% 9 October 2013 trades averaged just 204 shares in size. It reveals an
institutional presence in controlling prices.
50% A bias towards non-
genuine selling by
40% CommSec
Non-genuine trades by CommSec algorithms would
have contributed to a compromised pricing
30%
environment on 9 October 2013.
20%
Also, the artificial adjustments to prices made by
COMM trading programs were camouflaged by the
10%
genuine sales conducted for its retail clients.

0%
% of Downtick Trades
% of All Selling
12

CuDeco – 25 October 2013 Trading

After prices settled at the open COMM algorithms dictated prices over the remainder of the day.

CuDeco Trading - Price Chart 25 October 2013


210

205

200

195

190

185
CommSec (COMM) Downtick Trades by Size of Price Fall

-0.5
-1.5
-2.5
CommSec algorithms caused adjustments to prices in the manner of a non-genuine seller.

All CommSec (COMM) Sales by Volume


10
Thousands

9
8
7 Streams of tiny algorithmic
6 sell trades by COMM, many
5 of which were DT trades,
were prominent in
4 controlling prices.
3
2
1
0

CuDeco Broker Selling Profiles


65.2 % of CommSec DT trades were less
70% 25 October 2013 than a marketable parcel averaging 143
60% shares in size. Moreover, 85 % of trades
A strong bias towards averaged just 214 shares in size or $425 in
non-genuine selling value. It reveals institutional control .over
50%
by CommSec
prices, not retail selling.
40%

30%
CommSec was clearly the
20% dominant seller while conducting
trades that made artificial
10% adjustments to prices.
0%
% of Downtick Trades
% of All Selling
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CuDeco – 26 November 2013 Trading


In volatile trading on 26 November prices closed at the lows of the day due to the impact of CommSec
algorithmic trades. The COMM trading program distributed trades in the manner of a non-genuine seller.

60% of COMM DT trades were for less than a marketable parcel


i.e. They were trades from the COMM institutional desk.

CuDeco Broker Selling Profiles

60% 26 November 2013 It is counterintuitive to how fair markets


operate when a broker with 0.6% of all
A strong bias towards selling (i.e. JP Morgan), is responsible for
50%
non-genuine selling 12.3% of all trades that cause a fall in
by CommSec price,
40%
while a broker with 21.5% of all selling
(i.e., Macquarie) generated just 5.8% of
30% all trades that caused price falls
Also CommSec, with a similar amount of
20% selling to Macquarie, generated 50% of
all price falls.
10% The situation is completely contrary to
the laws of supply and demand.
0%

% of Downtick Trades
% of All Selling
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CuDeco – 4 December 2013 Trading


A flurry of trades at the open led to price falls that were eclipsed by strong gains in morning trade. COMM DT
trades kicked in after a slump from the day’s high and they then controlled prices over the remainder of the day.

Opening trades

CuDeco Broker Selling Profiles

70% 4 December 2013 81 % of CommSec DT trades were less than


a marketable parcel averaging 130 shares in
60% size and being worth around $247.
A bias towards non-
genuine selling by They are clearly the result of algorithmic
50%
CommSec
trades from the CommSec institutional
40% desk; not retail selling.
30%

20%

10%
CommSec controlled prices
form the moment their
0% algorithmic trading program
kicked in.
However, their trades were
conducted in the manner of a
non-genuine seller.
% of Downtick Trades
% of All Selling
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