Attention SEC: Sirius Trading Issues

Sirius XM (SIRI) forums have been buzzing all weekend over a “screen shot” that has been posted to the Internet and uploaded to sites such as YouTube. Investors in Sirius XM have assembled together and have filed complaints en masse with nearly every news agency, market maker and regulatory body such as the Securities and Exchange Commission.

The video itself certainly raises questions, yet offers very little in the way of real answers. I have found what I would consider to be one plausible explanation. Investors look at the screen shot in question and automatically lay blame on the market maker itself. Yet an SEC enforcement action against Goldman Sachs (GS) in 2007 may offer an alternative explanation, which only the SEC can prove or disprove at this point. It is my sincere hope that they will look into the matter.

In March 2007, the SEC reported the following:

“The SEC Order and the NYSE’s Decision allege that Goldman’s customers carried out the illegal short-selling scheme by placing their orders to sell through the firm’s REDI System© - Goldman’s direct market access, automated trading system - and falsely marking the orders “long.” Relying solely on the way its customers marked their orders, Goldman executed the transactions as long sales. In addition, because the customers had sold the securities short and did not have the securities at settlement date, Goldman delivered borrowed and proprietary securities to the brokers for the purchasers to settle the customers’ purported “long” sales… “

I am by no means implicating Goldman Sachs in this case. The history and reliability of electronic trading systems are called into question here. The only mistake the Goldman Sachs client made was that they executed all of their trades through Goldman. Criminals like everyone else learn from their mistakes. We have witnessed in recent weeks similar questionable trades that have moved from market maker to market maker.

Reviewing the 2007 release again we learn:

Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement, said, “Customers now have direct market access platforms such as REDI© and other automated
trading systems, which enable brokers to execute larger volumes of trades more quickly and efficiently for their customers. However, as this case makes clear, direct access does not obviate a broker’s own responsibilities under the Commission’s short sale rules, and it certainly does not allow a broker to ignore apparent discrepancies indicating illegal trading by its customers.”

Each week brings with it a new automated trading system that is called into question. Just one week ago, some were questioning NITE trading rather than ISEG. I would argue that the villain in this scenario is not a market maker at all but rather an individual or group of high powered investors or hedge funds that are using electronic trading systems to manipulate individual stocks; jumping from stock to stock and trading platform to trading platform. Like terrorists, they are striking quickly and moving often. SEC? Are you listening?

Disclosure: Long SIRI

Comments

[fpcat1:]

we appeal to sec officials to investigate the reports and complaints by many investors on stock market corruptiion and manipulation.

we request for sec's positive action as soon as possible.

Mar 23 02:38 AM

[sfm10:]

Thank you for illuminating the concern held by many.

Mar 23 03:00 AM

[sirixm:]

For some time, there has been a great deal of suspicion surrounding the trading methods on SIRI stock coming from the genuine traders that cannot quite fathom how SIRI has come to be in the position that it is in, other than to question the timing, quantity and source of negative media coupled with 'odd' trading patterns.

Until now, most of these 'suspicions' have been dismissed as paranoia. Fortunately, these suspicions are being taken a little more seriously now. They seem to be gaining momentum, as more and more instances of questionable trades and questionable 'journalism' take place. Ulitmately, this should lead to a review by the SEC.

An imminent review by the SEC will hopefully have a two prong effect:

1. Allow the stock to trade at it's true value without the downward push of illicit shorting. I believe the genuine value of the stock is substantially higher than the current trading zone of 30 cents.


2. An investigation will hopefully bring to light some of those who have been involved in unfair trading. A party or group that has been involved in illegal trading on SIRI will most likely have used the same techniques on other stocks and this should be revealed.

Mar 23 04:19 AM

[connorport:]

I believe that if this has been occuring and can be proven, there should be class action suits filed on behalf of the shareholders in this company. We have been manipulated into dilution that will take years to recover. I myself have personally wrote down over $40000 on this stock. This is ridiculous! Bondholders and debtholders have gained tremendously and ties with these holders and the trading firms themselves should also be investigated. Im sure a lot of shareholders wouldn't have jumped off the bus had things been played fairly by all of these crooks. There is no bailout plan for the commons who were dooped out of half of their life savings whether it be in SIRI, Lehman, C, BAC or whatever. I fortunately didn't believe the garbage and bought low but thousands didn't. Pure garbage

Mar 23 10:42 AM

[OKMONEY:]

So, Goldman allows the naked short sellers direct access to the market through their "state of the art" online trading program allowing Goldman to make more money, quicker, resulting in the retail trader getting F****d, and it's the online trading program's fault. My, oh my; what ingenious logic. Along the same lines maybe we should give a pistol and a knife to every convict upon their release from prison!

Mar 23 11:04 AM

[spr0949:]

Yet another argument in favor of banning Short trading.

Mar 23 12:55 PM

[dead elvis:]

wheres that Hartlieb guy (or howerver you spell his name) who sues everyone- havent heard a word from the Bozo- maybe he plays both sides "sues while shorting"

dont you think that if "he is who he thinks he is"- he should be involved with this mess- and unmess of this festering stock?

Mar 23 02:08 PM

[SirSwingerton:]

I am a newbee to the stock market. However, I have researched SIRI stock for the past week and I am more than sure that SIRI stock will continue to rise. This is basically an impression I have concluded off of the debt of SiriusXM being bought by Liberty. That, and the arrival of the iPhone application, I predict success. If I am to invest into this stock, is it a fair bet that I will make money? How much should one wager? Thanks for your input!

Mar 23 03:24 PM

[steve the p...:]

There is a lot of people ticked off about this, but the one question I haven't heard ask or discussed is "where did this screen capture come from".

Why would someone video or capture a screen of their trades? Specially a pro.

I worked in the back-office for Merrill and never saw anyone doing this. And if it were, the person would be reprimanded or fired.

Mar 24 07:22 AM

[pacosan:]

To steve the programmer,

Traders/day traders have level II at home, and post commentary of their trades on blogs and youtube. So that's just 2 reasons for recording your trades. I'd mention some websites that do live training exactly like this, but don't want to spam here.

Mar 24 02:45 PM

[jpau:]

Will this ever end??? the real problem with SIRI's stock price hasn't been, nor is it now, short sellers. SIRI stock price is pathetically low because of huge debt and dilution of the common.

For simplicity, I've left out the lousy economy, the auto sales freefall, the 1.7% monthly churn, etc.

The SIRI fanboy 'shortsellers are hurting my stockprice' conspiracy theory formula:

Pile of debt (XM) + Pile of debt (SIRI) + dilution to deal with bondholders + 40% dilution to Liberty = low stock price due to short sellers

Please explain your math...

Mar 24 03:24 PM

[rtatp31:]

SHORT SELLERS SUCK PERIOD.

Mar 24 05:19 PM

[rtatp31:]

The new report on short intrest however has SIRI down -so thats is good news -5.3% from Febuary

Mar 24 05:21 PM

[Edster:]

Urgent that SEC should conduct an investigation into the market
trading activity of SIRUS/XM. The tremendous volume of shares
traded with virtually little or no market price movement up or down seems highly suspicious. Possible manipulation of the the stock
price exists obviously benefiting some groups at the expense of existing longterm SIRUS/XM stock holders.
common stock holders.

Mar 25 06:32 AM

[shure46:]

And now we can understand why our entire economy is in shambles ..... Although these manipulative games Wall Street plays are grossly unethical , apparently , they are technically legal ..... We live in a world where the " Letter of the Law " takes precedence over the " Spirit of the Law " , therefore opening up myriad loopholes for the crooks to drive a truck through ....... Our legal system is a Levee full of leaks , and everytime Lawmakers plug a hole , a new one pops open , because an entire Law can be completely circumvented based on the definition of one word , and how different sides interpret that one word ....... ie - " I did not have sexual relations with that woman " , and we spend 6 months and 40 million dollars trying to interpret the definition of , " sexual relations " ........ Old news , I know , but a perfect example of the stupidity of our legal system

Mar 25 12:01 PM

[User 382891:]

can anyone explain to me why this stock dropped 40% last thursday for about one minute.

Mar 25 01:38 PM