The Securities and Exchange Commission engaged in illegal so-called fake trading of meme shares in a scheme that allegedly deducted hundreds of thousands of dollars from two traders, including GameStop Inc., for fraudulent rebates from many stockbrokers. Was charged as.
Wash trading is a type of market manipulation in which traders seek to provide the market with false information about the supply and demand of certain securities. By placing buy and sell orders for the same security at the same time, you usually leave the actual financial benefit to the transaction. Please wash. ”
SEC Said in a complaint on Monday Investors Suyun Gu and Yong Lee have used the maker taker model in the options market, which market makers use to attract orders and increase market liquidity. The market maker pays the broker a “make” fee to place an unmarketable limit order or an order that is unprofitable at the time of trading due to the current price of the underlying security.
They pay these fees, guarantee that there is someone on the other side of the transaction for someone who places a marketable order, and that person pays the “take” fee. Makeup fees are usually less than take fees, and market makers keep the difference in their pockets.
According to SEC complaints, certain brokers give their customers make-up and fees, while others do not. The agency is illegal by Gu and Lee “using a broker-dealer account that returns a rebate to the customer to place the first order on one side of the market, and then using a broker-dealer account on the other side. I was able to generate great profits. ” market. “
From February to April of this year, the price of meme stock, which became a favorite of retailers active in social media including GameStop.
AMC Entertainment Holdings Co., Ltd.
And Nokia Corp.
It was rising rapidly. According to the SEC, Gu and Lee can leverage the dynamics of these markets to earn higher commissions than usual by ordering out-of-the-money put options on these and other stocks. I guessed.
“After a particular broker-dealer closed Gu and Lee’s accounts in early March 2021, Gu lied to broker-dealers about his trading strategy and used and accessed accounts in the names of others. Allowed the scheme to continue until mid-April 2021. According to a SEC press release announcing accusations of “these accounts via a virtual private network to hide his activities.”
“The proceedings quickly investigate and publish complex trading schemes, including those that take place during periods of significant market volatility,” said Joseph Sansone, head of market abuse at the SEC, in a statement. It shows the SEC’s ability to do so. “
The SEC has investigated a number of issues related to the memetic stock phenomenon after some brokers restricted trading of GameStop and other stocks. Strong retail interest in these stocks has created a large broker collateral obligation for central equity clearing institutions.
SEC Chairman Gary Gensler said at a hearing at the Senate Banking Commission earlier this month that authorities were “quite close” to issuing a comprehensive report on the case.
The SEC will charge two overwash transactions for GameStop and other so-called meme stocks
Source link The SEC will charge two overwash transactions for GameStop and other so-called meme stocks