Au Fund Managers Manipulating the Sharemarket – Researchers

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By Athena Yenko | April 14, 2014 3:48 PM EST

Fund managers are allegedly manipulating the sharemarket during critical hours before the markets close at 4pm, researchers at Capital Markets Co-operative Research Centre (CMCRC) claims.

Market manipulation is rampant in Australia as compared to other markets in the world, the research body contends.

CMCRC alleged that the manipulation was done by fund managers in order to augment their bonuses.

Manipulating the market during critical hours before market closing regularly happens 15 minutes in each trading of the months - quarterly and during the ends of financial years. The sharemarket index during the ends of financial years is important basis for company valuation, executive salaries, superannuation policies and capital returns to investors.

"They are getting money in all the time but instead of buying it every day they save it and buy it at the last minute to drive more demand,"  chief executive of CMCRC, Michael Aitken, told The Australian Financial Review. 

Whether the manipulation is done to create spikes at the market or to deliberately create an unusual volatility, it is not a good look according to Mr Aitkin.

"Volatility in the end of day price is quite a problem in this marketplace. The price is dramatically bouncing around at the end of the day," Mr Aitkin said.

The Australian Financial Review mentioned a case in Dec. 20 2013 when there was a $23 million worth of trade during the last 15 minutes exclusively for three stocks - Village Roadshow, Ocean Gold and REA.

To expose more market manipulation and track high-frequency trading, ASIC will employ its $44 million market surveillance system.

"There have been examples of bad behaviour on future rolls in the past and we have absolutely taken action," ASIC commissioner for markets Cathie Armour said.

However, Ms Amour said that while the commission can pin point a suspicious trading, proving that the trader behind the suspicion has illegal intention is more difficult.

CMCRC had been bridging the balance to meet the practical needs of capital markets and conducting academic research since 2001.

CMCRC was founded through sponsorship from the Federal Department of Education Science and Technology program and was just recently awarded funding amounting to $32.5 million.

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