Monday, May 14, 2012

Was JPMorgan Banging the Close?

Larry Doyle thinks so:
The JPM traders managing the risk within this portfolio were known to execute trades over the course of the last few days of the month. Why is that so interesting and important? If the firm had such large and unwieldy positions, this end of month trading activity would likely be seen as an indication that JP Morgan was trying to influence the month end pricing valuations of the indices in question. Those pricing valuations would obviously directly correlate with reported profits and losses. 
 In layman's terms, active and aggressive end of month trading for the purpose of influencing a month end valuation is known as “banging the close.” I addressed this type of trading in August 2010 when I wrote, “Markets Don't Go Up, They're Put Up”,
…the simple fact is variations of ‘banging the close' or assorted other techniques can be used to illegally move many markets. Although I never put much credence in those who promoted conspiracy theories and tales of market manipulation, I now do not discount those who hold these feelings —  including my uncle, a world class cynic and longstanding broker. What did he share with me a few months back? He offered, “Larry, it's a racket. Markets don't go up, they're put up.” I chuckled. . . and he responded, . . . ”You think I'm kiddin' ya?”
This is getting to look more and more like desperation amateur night at JPM. You don't need to bang the close, if you know what you are doing.

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