IMC Financial Markets is accused of failing to maintain a fair and orderly market on the NYSE. The Designated Market Maker (DMM) may have messed up the closing auction of the stock Versum Materials (VSM). The stock is spun off from Air Products & Chemicals (APD). The market maker allowed the shares to spike in the closing auction.

Auction spike 9%

It was the first trading day of Versum Materials. Volume was high, because of ETF baskets rebalancing. Large cap ETF’s had to sell it, other ETF’s were forced to buy the stock. Slowly, the shares edged higher nearing the end of the day. The final auction at 16:05 spiked up with 9%. More than two dollars higher. From $25,63 to $28. The following day, the stock lost it’s ground again. See the featured graph on top.

Buyers blame IMC

Investors buying the stock at the close, cast the blame on IMC. The responsible market maker, again Don Himpele, should have done something to prevent the stock closing with a spike. He could have waited a bit longer, for sellers to appear in the auction. Or sell more stocks to take an overnight short position on his own book. Or maybe, he did a perfect job. NYSE is investigating.

The Man Who Took KKR’s Stock for a Ride

Don Himpele is famous for another auction. With the market turmoil of August 2015, he allowed KKR to open almost 50% lower than the previous close ($10 versus $19,55). “The man who took KKR’s stock for a ride”, wrote the Wall Street Journal. KKR considered getting rid of IMC. But they sticked stuck to theoretical considering, as IMC is still the market maker in KKR on big board.

For auctions on the same day in August 2015, JP Morgan Chase fired their market maker on the floor. KCG was shown the door, and they picked Virtu instead.

Human auctions give discussions

When a human market maker handles the auction, there will always be discussion. Human judgement isn’t flawless, and people make mistakes. The value added by a market maker on the floor is puzzling. Claims by NYSE about the benefits of their hybrid market model sound vague. There must be something good about DMM’s. Just haven’t found out yet.

Source : WSJ