Brokers Are Cannibalizing Customers

The Bucharest Stock Exchange (BSE) stopped reacting to any stimuli from the real economy a long time ago, while Romanian brokers are scrutinizing Western markets and copying their trends.

Ironically, the major Western markets themselves are no longer an accurate reflection of the real economy. The crisis has placed the psychological facet of the capital market in charge of the bourses.

Stock Exchanges in London, Berlin and New York have been posting unwarranted growth lately, in contrast with declining economies.

Some bad omens coming from the major bourses gave Romanian brokers a cold sweat yesterday.

This would be the cause of their rush manoeuvres, which, through a combination of transactions on both markets - the Bucharest Stock Exchange and the Sibiu Monetary & Commodities Exchange - caused customers to lose some 40,000 EUR.

If the theories about this subject turn out true, we are probably looking at an abuse of the market.

Which is quite hard to prove under Romanian laws...

The certain part is that, of the few investors still left on the Romanian capital market, some were forced out yesterday. And they will never come back.

• Market Suspicions...

Shares in the financial investment firms, especially SIF2 Moldova and SIF5 Oltenia, incurred strong fluctuations yesterday, prompting some of the players to suspect that manipulation was at play.

In a span of only 45 minutes, SIF5 shares jumped from 1.18 RON/share to 1.23 RON/share, then went back to the initial price only to start rising again. Similarly, SIF2 went from 1.04 RON/share to 1.12 RON/share and back to 1.07 RON/share in the same time window as SIF5.

The fluctuations in the price of the two stocks listed on the Bucharest Stock Exchange took place after 1 p.m. and prompted a wave of "stop loss" orders for short positions on the Sibiu Monetary & Commodities Exchange left open for the two firms, market sources indicated. It is believed that some of the brokers were aware of the levels set for the "stop loss" orders and manipulated the spot market in that direction in order to execute on the sellers of the respective derivatives. This manoeuvre made them a profit of some 40,000 EUR.

The bourse is facing the risk of losing investors along with the loss of the money in the latter"s accounts.

BSE Director General Anca Dumitru told BURSA that the BSE kept in mind the transactions performed with SIF stock yesterday, just as they kept in mind all transactions involving unusual prices or volumes. "The analysis of these transactions could take a few days," Dumitru said, adding that, should the BSE find irregularities, immediate notification would be sent to the National Securities Commission (CNVM).

1. London

Despite an 11% decline in the British industrial output in the last semester, the London Stock Exchange has gained 40% since March. Between Friday and noon yesterday, the FTSE had risen 3%.

2. Frankfurt

The DAX30 gained 4% between Friday"s closing bell and noon yesterday. The growth occurred amid a 0.9% decrease in the German industrial output in the last month.

3. New York

The unemployment rate in the U.S. has reached 9.7%, the highest level in the last half of a century. However, the NYSE gained 1% yesterday morning.

4. Tokyo

The statements made by the future Prime Minister of Japan (after the LDP had won the parliamentary elections) that he would no longer intervene to maintain a weak yen made the Tokyo Stock Exchange into the only major exchange to decline below the year"s peak.