ISX Cracks Down on Speculators

By Mark DeWeaver.

On December 13 the ISX amended the Iraq Depository Center (IDC) bylaws to prohibit investors from owning the same names in accounts at different brokers. The new rule, which went into effect on January 7, requires anyone holding stocks in the same company through different brokerage accounts to transfer all of their shares to just one of them. The ISX may penalize those who don’t comply by barring them from trading.

This change is evidently intended to crack down on share price manipulation. Ramping share prices is easy to do if you can sell shares back and forth between two accounts. You simply sell the shares to yourself multiple times at higher and higher prices. Then, once ordinary investors start to jump on the bandwagon, you gradually sell off your holding to them and get out at a profit.

It’s easy to see why the ISX should be cracking down on such behavior at this point. With the Asiacell IPO starting this month, ISX officias are understandably focused on maintaining an orderly market. There were also a few names that had been limit up for several days prior to the announcement and fell sharply immediately afterward. In hindsight, these cases look more than a little suspicious.

This rule change won’t end share price manipulation for long, however. In the very short term, speculators may have been caught off balance because they will no longer be able to use some of their brokerage accounts. But it won’t take them long to set up new accounts in different names. Then they will quickly get back to business as usual.

8 Responses to ISX Cracks Down on Speculators

  1. paul January 8, 2013 at 5:56 am #

    well,its basically doing what the big boys do isnt it ?…..they control the market of any given share by buying or selling at a vaste rate….so why not the smaller trader ?pffft

  2. Hezha January 8, 2013 at 10:20 am #

    This is making speculators sound like a virus or thieves, please do remember that speculators play in important role in the markets, one is that they provide liquidity, secondly most speculators are there to exploit the market inefficiencies and hypes, and by them doing this for their own benefit, the markets benefit also due to over-priced shares coming down and vice-versa. Speculators take very high risk moves for high returns, so if they are wrong, the market will punish them for it, better than any commission will. For the ISX to start banning speculators is ridiculous, remember a stock market in its truest form is supposed to be a representation of a free market, but with government imposing all kinds of restriction, it takes away from its benefits, not add to it.

  3. adrian January 8, 2013 at 12:58 pm #

    Scams are everywhere in Iraq. And many in America have taken advantage of this. The largest was the sale of dinar, followed scams military and contractor there who have plundered this country. Very smart of U.S. sanctions, Oil for Food, the 2003 war, and to end 13303. There are still those who think that buying dinars and keeping it under the matress become millionaires. Wow Century 21 and many people silly.

  4. DeWeaver January 8, 2013 at 3:27 pm #

    Hi Hezha – The problem with the kind of share price manipulation I’m describing is that the small investor inevitably ends up getting ripped off. The speculator in this case isn’t really taking a risk because he’s controlling the prices himself.

  5. DeWeaver January 8, 2013 at 10:49 pm #

    It’s financial fraud no matter who does it!

  6. […] ISX Cracks Down on Speculators […]

  7. Sinan February 4, 2013 at 4:17 pm #

    Dr. Weaver,
    very interesting article would you know if IMPI Modern Paints is still operational in Iraq? and do you have any contacts there?

  8. DeWeaver February 4, 2013 at 6:48 pm #

    Hi Sinan: Yes, they seemed to still be in operation as of their 2011 annual report–though of course anything could have happened since then. I’ve never met anyone from the company though.

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