Downticking is when a trader sells stock so that the most recent change in the share price is negative. This is usually done right before the market closes using very small amounts.
And since stock charts only follow the closing price of a stock, you can see how easy it is for a short seller to create a nasty looking downward chart by spoofing and down-ticking.
These practices are illegal but happen to many Canadian stocks.
Just ask the Ontario Securities Commission.
Most retail investors don’t see this type of activity because most trade without the use of Level II data. They only see the last bid/ask price, which as I already mentioned earlier, may not even be correct.
The next time you see a stock in the green for the whole day, only to end up in the red with less than a minute to go, you now know what could have happened.
The problem for Canadian regulators is that they can’t keep an eye on the thousands of stocks that trade every day.
Even when they do catch it, it’s extremely difficult to find the culprit behind the trades since the short sellers have multiple accounts at different financial brokerages and often work with other short sellers.
Furthermore, regulators often rely on complaints.
But how can a retail investor make a complaint if they don’t even see this “spoofing” or the down ticking because of the lack of mandate for consolidated market data?
Retail investors don’t get to see the Level 2 data because it’s expensive. How can an investor react to this type of predatory short selling?
How can an investor report manipulative trading to IIROC or the Canadian Securities Administrators (CSA) if they don’t have access to the data?
If there was a regulatory mandate to provide consolidated market data in Canada, we could make much more informed investment decisions.
If Regulators could mandate market data transparency with new short sale regulations such as the re-implementation of the uptick rule and more frequently updated short reports (currently only reported semi-monthly), then maybe we could prevent the Canadian market from failing.