review on lynas trading based on iress data , page-9

I guess we all have suspected parts of it, but it makes fascinating reading if put together like this.

It pretty much boils down to the discrepencies between short positions, substantial share holdings and off-market covering. and that there is zero transparency on the ASX.....I think the word CARTEL is used quite frequently.

From that review:

7.1.2.6.8 COMMENT:
The data demonstrates large disconnects between reported changes to open positions and the borrowingand lending of stock that supports short selling. In fact there are many peculiarities associated with thetrading data that could only really be explained through extensive audits. It is quite extraordinary, forexample, that the increase of 18.9 million share
s in open positions on Dec 18 just isn’t reflected by changes
in net borrowing at all and net lending data show a decrease of 3.5 million shares.Also, on Dec 21, 208.1 million shares were borrowed but net borrowings were 100.2 million sharesindicating 107.9 million shares were on-lent. Net borrowings showed a decrease of 7.4 million shares fromthe previous day yet changes to short positions showed an increase of 13.7 million shares which is theopposite to what borrowing data would suggest. Furthermore, the increase in open shorts of 13.7 millionshares corresponded to a decrease of 14.02 million shares in net lending on the same day
–
An increase inlending would be expected to accompany an increase in open short positions not a decrease.The figures
simply don’t compute. A decrease in lending should be mirrored by a decrease in borrowings of
the same order, and hopefully a commensurate decrease in open positions as well. The mismatch in thedata is unacceptable and casts a blanket of confusion over what is actually taking place in the market.Dec 21 is not an isolated example. Daily borrowing and lending data regularly provides confusing signalsthat prevent proper judgments being made about what is actually taking place with trading. The confusioncreates mistrust, and markets simply cannot function without investor confidence in the market systemitself.The difficulties in being able to accurately monitor what is occurring within the securities lending industryand being able to gauge what the impact of securities lending is having on the market represent key issuesfor an industry besieged by integrity issues.
Certainly, the ‘off
-
market management’ of short positions and the ‘unwinding of short positions’ through
off-market adjustments is diametrically opposed to the notion of free and fair markets and is contradictory
to the regulator’s own guidance
..
Excerpt from the ASIC Website <
LINK
> RG 196.85
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The Government has described positional reporting as providing an indication of the bearishsentiment within a particular stock at any point in time and also the amount of overhang in the stock that will need to be covered at some point by short sellers purchasing shares. In addition, for investors, thisinformation may provide an indication of the level of risk involved in shorting the stock. For example, it may be risky for an investor to take a short position in a particular stock if a significant proportion of that stock has already been shorted. T
his is because there is a greater chance of being subject to a ‘short squeeze’ if
market sentiment changes and the investor is required to close out its position quickly.
The reality of day to day trading in the case of Lynas is that short squeezes rarely eventuate because of off-market intervention. Short sellers purchase shares as suggested by ASIC but they have omitted to informinvestors that more often than not large purchases are done off-market. Off-market adjustments also havethe effect of withdrawing large blocks of liquidity away from the market. For the markets to have integrityand if principles of fair trading are to be maintained then the liquidity associated with off-marketadjustments needs to be put through the price discovery process. In that way short covering purchaseswould help to offset the downward pressure associated with short selling on-market.The current situation provides more than ample opportunity for share price manipulation through excessivelevels of short selling and collusive dealings between fund managers whether it by the use of algorithms andspecial crossings on-market or through extensive off-market dealings. Ensuring that both short selling andshort covering are both exposed to the processes of price discovery would perhaps go a long way torestoring some respectability to the market.