From: duel@shell.portal.com (Omid M Farr)
Subject: Re: Small-scale stock price manipulation?
Organization: Portal Communications Company
Date: Mon, 4 Jan 1993 17:28:30 GMT

In article <1993Jan04.053418.27547@rat.csc.calpoly.edu> rteasdal@polyslo.csc.calpoly.edu (Rusty) writes:
>	For some time now, I have been taking occasional notice
>of small outlying trades while watching the ticker roll. Usually 
>these trades are either above or below the current bid/ask range
>by a small percentage, and they are rarely more than a hundred-share
>round lot in size.

Different exchanges can have different Bid/Ask.  For example, on the NYSE
(generally the most liquid) IBM may be trading at bid 50-3/8 ask 50-1/2, but
on a regional exchange (illiquid at times) the stock could be at bid 50-3/8
ask 50-5/8.  In fast moving markets, there is usually a larger price
discrepancy.  

>	Could these types of trades be a price manipulation effort
>of sorts? To elaborate, consider the following scenario: I'm a 
>hypothetical investor with a large position in XYZ, which is just
>beginning a strong upmove. I can artifically create the appearance
>of stronger demand than actually exists, by the expedient of making
>a small purchase some distance above the current bid price. 
>
>	This trade will be recorded as the high of the day; in fact,
>in a thinly traded, illiquid OTC issue, if I entered it just before
>the end of the trading day, it has a high probability of being recorded 
>as the close. This will make the issue appear attractive to chartists
>and the like, augmenting its price appreciation potential in the next
>day's trading. If properly done, this might be quite profitable.

If a stock is bid 10, ask 11, and you place an order to buy at 100, you will
get filled at 11 (unless you can clear all the asks between 11-100).

Also, if you could find an illiquid stock and move it up 2 pts during the last
3 minutes of trading -- who will you fool?
Odds are you will create more individuals SELLERS than buyers.  You might try
to push a stock above a resistance point, or below a support point -- but if
that was possible during the last few minutes of trading (and with a small
amount of capital), then it isn't support/resistance.

>	This seems eminently practicable. My question, though, is whether 
>it's even legal to pull this kind of stunt. Could one expect a knock on
>the door by the SEC after a few such trades? Does it constitute illegal
>manipulation of securities prices? On the one hand, it does seem to be
>exactly that, manipulative. On the other, it is after all a free market 
>for the most part, and one ought to be able to sell or buy at whatever
>price one chooses within it, mais non?

There is nothing illegal about paying above market price for stock.  However,
if you start to place dozens of 100 share trades every day or two on the
same equity, then it may be considered manipulation.  There is nothing wrong
with buying 100 shares here and there, but if you make it appear as if
hundreds of individuals are buying (rather than one individual, yourself) it
is manipulation.
 

If you really want to push stock prices higher, then try stocks that trade
after 4PM on the Pacific.  Many times you will find stocks like USS close on
the NYSE at 68, but are moved up to 69 (or down to 67) on the Pacific.  Most
newspapers, quote services, etc use these trades as the final quote.
It doesnt take much to move stocks on the Pacific after 4pm (esp. on an 
illiquid <120M trading day).  1000 shares usually buys you 1/8 or 1/4 on blue
chips like IBM and EK.  However, there will be a lot of traders who will gladly
sell you shares 1/2 higher than they were trading before the NYSE closed.