Aug

24

What's the likelihood of folks' "painting the tape" on a very illiquid Friday 8/31? This applies less to liquid securities than equities or index futures. As an example, I have seen it done in high yield — or at least it appeared to have been done. Call reports and other mark-to-market/model issues will be interesting to watch, especially TRACE.

Larry Williams replies:

You believe in that? I never did. Suspect it's an old wives’ tail. But I’ve never been that close to the fire. If they paint the tape, buy to drive prices up, they have increased their longer term exposure for a momentary gain.


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  1. Bilal Raja on August 27, 2007 10:42 am

    I’ve seen it done in some mid cap / small cap european stocks on a daily basis. However, I have also seen the opposite happen on a regular basis too (ie the closing print is below the last bid offer and sometimes below the day’s range). My intuitive and untested theory behind this is that a number of markets which still use an auction system at the close (or after the close) are subject to manipulation that either amplifies the days trend or reverses it depending on how the market makers would are positioned.

    However, a number of multi-strat and convert arb types often trade the futures in the last 30 mins of trading in Europe (normally using either the Eurostoxx futures or the Dax futures) to delta hedge positions. Normal volumes in the futures can take these positions reasonably well but when the daily gamma moves are violent, the last 30 mins of trading can be equally frightening if one is on the wrong side of this. Last summer (May 06 - June 06) was a particularly vivid (and for some, painful) example of gamma trading influencing market closes. From memory, it even managed to get onto the front page of the FT.

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