Are Big Banks' Dark Pools Behind The Run-Up In Bank Stock Prices?

Bankers have sold hundreds of millions of their own stock as the market has ripped higher post-election - more than in any year of the last decade...

 

Which makes us wonder - as Pam Martens and Russ Martens of WallStreetOnParade.com ask, are big banks' dark pools behind the run-up in their own stocks?

The biggest banks on Wall Street, both foreign and domestic, have been repeatedly charged with rigging and colluding in markets from New York to London to Japan. Thus, it is natural to ask, have the big banks formed a cartel to rig the prices of their own stocks?

 

This time last year, Wall Street banks were in a slow, endless bleedThe Federal Reserve had raised interest rates for the first time since the 2008 financial crisis on December 16, 2015 with strong hints that more rate hikes would be coming in 2016. Bank stocks never do well in a rising interest rate environment because their dividend yield has to compete with rising yields on bonds. Money gravitates out of dividend paying stocks into bonds and/or into hard assets like real estate based on the view that it will appreciate from inflationary forces. This is classic market thinking 101.

 

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As we contemplated a more rational basis for the heady uplift in Wall Street bank stock prices this year, we were forced to consider the fact that the Wall Street banks run their own Dark Pools — which are effectively unregulated stock exchanges. That’s right. In addition to owning FDIC-insured banks holding Mom and Pop deposits; in addition to parking trillions of dollars of squirrely derivatives on the books of the FDIC banks; in addition to using those demand deposits to make wild, speculative gambles in the markets; in addition to being charged by regulators around the globe, including the U.S. Justice Department, with an insidious disregard for rigging and colluding in markets, the very same banks are allowed to operate quasi stock exchanges in the dark bowels of their own trading houses.

 

 

The chart above from Wall Street’s self-regulator, FINRA, shows that in the week of January 9, 2017 the Dark Pools of Wall Street’s banks made 49,487 trades in the stock of JPMorgan Chase. The biggest traders were UBS, which traded 1.7 million shares; Credit Suisse’s CrossFinder, which traded 1.2 million shares; and, shockingly, JPMorgan’s own Dark Pool, JPM-X, which traded 1.1 million in its own shares. In a rational world, we would be seeing handcuffs and perp walks for this kind of backroom dealing.

 

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We don’t mean to suggest that JPMorgan’s stock is the only one being traded in the Dark Pools of Wall Street banks. In fact, every mega Wall Street bank is being similarly traded.

Read the full analysis here at WallStreetOnParade.com...

 

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