The Dutch watchdog for financial markets, the AFM, strikes again.

Accent Grave has been fined for manipulating the market in the penny stock NedSense in August 2010. Daytrading shop Accent Grave earned EUR 1900 with “pump and dump” trades, and are fined with EUR 50.000.

Changing last traded

In short, the trader bought 18k of these shares at 40 cent in the opening. During the day he traded a few back and forth. In two days he made 1878 euro before costs. The problem in the eyes of the AFM is this ; he bought twice a very small amount (say, 100 shares) at the offer. So the last traded price changed.

In the view of the AFM the last traded price is the value of a stock. That’s a little old fashioned. Especially in very illiquid penny stocks the only thing matters is at what level you can get out of your position. The midprice is a better indication.

Anyway, the arguments between the AFM and Accent Grave are in this pdf (nl). See page 3 for an overview of the trades. What Accent Grave could have said was “these small trades were only executed to check for iceberg orders“.

Two years investigation

My sympathy is with the struggling modest trading shop. A fine of 50k is way out of proportion, especially for this innocent kind of manual trading. It’s not like they’re hurting the integrity of the markets. Perhaps the AFM staff should try to trade stocks for a few days, to get a grasp of the real trading world.

It has taken the AFM more than two years to end this case, and as requested by Accent Grave / Circonflexe the decision has been kept silent until this month.