To Be A Regulator, Or Not To BeIs being a regulator of the TSX a dream position? It is an important job protecting the integrity of Canada’s largest capital market. Maintaining the public trust so people feel safe investing in the market is their reason for being. Insiders should not have an advantage. Protecting the public interest allows the efficient formation and allocation of capital so the economy can grow. The movement to new international accounting standards is driven by this need. The underlying principle of money purchase pension plans and trading units in mutual funds is that the market value of the unit is accurate. The public relies on regulators.
Unfortunately, the TSX is subject to self regulation. Haititrader put it simply as ““Manipulations taking place these days are mostly within the law and lawis not written by small fish. So there will be lot what you don’t like. It won’ttake you anywhere.” The track record of convictions is spotty at best as demonstrated by Bre-X and Nortel. The challenges of getting a conviction are enormous. The volume of transactions on a daily basis creates the haystack to hide the pins of deceitful acts. The work required to pursue an investigation limits the number of investigations. Creating a deterrent factor is the goal to encourage people to take the high road when easy could be made.
What are the odds of a buy side manipulation on thinly traded stock, ONC, attracting the attention of the regulator? It is not a new manipulation. As future posts in the series From Ugly Duckling to Market Darling will show, many of the elements of the manipulation are legal and above board. The series will also include some actions that cross the line so in the aggregate the public interest has been violated. It is reasonable to assume that the regulator will become aware of the full series of posts.
The regulator has the advantage of access to trade data and programs to analyze it. It would not take much effort to validate, or not, that some trades were made with the intent to deceive the market. The large trades that caused the fall in November 2009 following the announcement of the pivotal trial and raising more capital is one example. Another example is trading that caused the spike to 52 week high in 2010 so the current trading of ONC is not attracting attention. If the validation of deceitful trading patterns raises suspicions, the regulator has the authority to follow the audit trials to identify the parties involved and the hunt begins. Before long they would be seeking the indentify of people posting on Stockhouse.
Retail investors hold onto your shares. The April 2009 story of Dendreon, DNDN on the Nasdaq, is going to be repeated with Oncolytics soon. Consider buying and using margin. Institutional investors are wise to recognize the risk of condoning the buy side manipulation and acquire their position quickly. Distance your trading activities from the buy side manipulation by being forward looking in your evaluations.
Here is table showing the trading of Dendreon in April 2009.
| Date | Closing Price | Volume |
| 1-Apr-09 | $4.14 | 3,199,650 |
| 2-Apr-09 | 4.34 | 2,427,867 |
| 3-Apr-09 | 5.99 | 22,497,200 |
| 6-Apr-09 | 6.58 | 19,585,750 |
| 7-Apr-09 | 6.58 | 7,346,062 |
| 8-Apr-09 | 6.37 | 5,392,639 |
| 9-Apr-09 | 6.30 | 4,234,697 |
| 13-Apr-09 | 7.30 | 12,775,310 |
| 14-Apr-09 | 16.99 | 65,120,890 |
| 15-Apr-09 | 17.17 | 19,294,060 |
| 16-Apr-09 | 17.03 | 6,894,881 |
| 17-Apr-09 | 17.99 | 17,799,470 |
| 20-Apr-09 | 19.52 | 17,724,250 |
| 21-Apr-09 | 19.74 | 11,008,510 |
| 22-Apr-09 | 20.12 | 7,358,435 |
| 23-Apr-09 | 20.33 | 6,123,418 |
| 24-Apr-09 | 20.08 | 7,393,327 |
| 27-Apr-09 | 21.55 | 18,569,850 |
| 28-Apr-09 | 11.81 | 28,070,740 |
| 29-Apr-09 | 22.94 | 48,235,790 |
| 30-Apr-09 | 21.20 | 17,468,950 |
| Last Friday | | |
| 4-Mar-11 | $32.68 | 2,842,863 |