The New York Post broke the story of how, last week, the New York Stock Exchange (NYSE) gave special treatment, in the form of after-hours trading, to investment bank giant Morgan Stanley. The exchange has since been seen scrambling to excuse what amounts to a form of market manipulation, something crypto markets are continually accused. Such Wall Street favoritism comes amid gaggles of government bureaus and regulations of the industry.
Morgan Stanley Gets Sweetheart Treatment by NYSE
“At the New York Stock Exchange, some traders are more equal than others,” Post reporter Kevin Dugan began. “That’s the bitter takeaway from stock brokers, who say the Big Board, in an unusual move last week, gave special treatment to a broker at Morgan Stanley who asked to trade large blocks of stocks for several minutes after the markets closed.”
Fears were running wild on Wall Street ahead of presidents from China and the United States meeting at the G20 Summit, where trade was to be among the hottest topics. Normally, once trading hours expire, that’s that; however, the Morgan trader, according to Dugan’s account, was “frantic.”
Though every other trader was shut out of making further orders, “exchange officials on Friday looked the other way, according to the sources,” the Post revealed. “Rather than cutting him off at the standard deadline — 10 seconds before 4 p.m., they gave the Morgan Stanley broker until 4:08 p.m. to complete a last-minute flurry of big transactions, according to the sources.”
Rules for Thee and Not for Me
Those seemingly benign minutes, unimportant to a casual observer, could make a huge difference to the bottom line, and be a real trading advantage. It appears rules are for some, and not others, as the NYSE “is willing to bend even the most basic rules that govern trading on the exchange — if the client is big and powerful enough,” Dugan mused.
Some insiders are suggesting possible Securities and Exchange Commission (SEC) action, while others are noting other exchanges have been successfully sued for similar instances in bending rules.
For its part, an anonymous Morgan Stanley source explained “trading was still open when the broker filled his last-minute orders.” However, Dugan recounts, “Last Friday’s blowup came as the broker was scrambling to help big clients rejigger their portfolios after a Friday change in the makeup of some major stock indexes, the sources said. After missing the deadline for electronic orders, the Morgan broker tried to make the trades manually by alerting NYSE officials, called Designated Market Makers, that he still had orders to fill.”
Large fast food parent companies, Berkshire Hathaway, a casino, and a commercial real estate trust were among the beneficiaries of special treatment. What essentially the NYSE did was save Morgan from missing out on a full two days of market action, and, crazy enough, “stock prices spiked in the wake of Trump’s tweet about a thaw in the trade war with China — and potentially saved clients money by getting in on the stocks during normal trading time,” the Post noted. All four Morgan clients opened higher that Monday.
“NYSE is freaking out,” Dugan reported another anonymous source in a follow up piece on the issue. “They are going crazy looking for who told.” Leaks like these can often turn into enormous water falls, as more incidents are discovered and patters emerge — though no one has yet suggested as much.
“The NYSE’s internal regulators are looking into the incident, according to a source briefed on the investigation,” Dugan insisted. The NYSE is still feeling the sting from a $14 million fine for similar behavior earlier this year.
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