Clearly a lot of work went into that blog. Along with the research necessary to gather the data the analysis is an impressive undertaking. The interpretation of different institutional account types such as broker entrepot accounts in particular demonstrates a very good working knowledge of equities settlement practices which is no doubt well beyond general knowledge even for many long term investors.
Having said this and ignoring some of the intricate details of specific movements and the identities of individual participants, after reading it I find that most of it is really not all that surprising. I don't say this to be apathetic but rather I believe many of us know that such practices exist and have been more commonplace in recent years even if the details of how they go about it have been vaugue.
Now I know this sound like I'm saying "thats the way the market works, live with it" but I'm not. I agree that changes to the exchange trading, settlement and published data specifically provide advantages to some participants at the expense of others. I fully believe that practices of many brokers servicing retail clients offer unfair contracts and that these organisations are often not acting in the best interests of the majority of their clients and are not obliged to do so. Our own money and equity is often used to fund the actions that ultimately seek to deprive us of that same equity. Ignorance and apathy make all this not only possible put relatively easy. But what can we do ?
Certainly a document like this isn't a bad starting point and if it does nothing more than make people aware that the market in which they participate isn't really all that fair then great but as individuals unless we are presented with an easy option to avoid being ripped off most will do little other than complain. The issues are complex and you will note that even with a massive amount of research and effort the blog is more a description of the symptoms rather than a specific diagnosis of the disease. After reading it I'm sure most get a sense that something smells bad but can anybody say specifically who did what wrong ?
No doubt its very difficult to take this analysis and drive it to the next level which is a list of hypothesis which can then be proven. Without this its hard to make specific accusations of wrong doing or point to rules which provide unfair advantage and thus ask for specific changes to prevent such. Remember that the exchange makes much of its revenue from these participants and not directly from you and I and as a commercial outfit its primary goal is surely whatever provides maximum return to its shareholders. It is no longer self regulating partially for this reason. Most regulators need solid hypotheses and proof before they are willing to tackle anything. They are reactive rather than proactive by their nature.
If people want this research to be a catalyst for change then they need to recognise that what has been done so far is only the awareness stage. Its not a smoking gun. There are few if any market participants other than mum and dad investors that would benefit from a crackdown on some of the suspected practices and absolutely nothing happens without specific proof. Expecting a white knight to run the gauntlet on our behalf is therefore unlikely.
If you want a fairer market then I'd suggest that it starts with baby steps. Its sometimes the smallest things that make the biggest difference.
PS. The above said, I would really love to hear what the author suggests are the next steps.
CDU Price at posting:
$3.39 Sentiment: Buy Disclosure: Held
