Who Painted Ambac’s Tape?

March 10, 2008 7:30am by

Have a look at this run of transactions in the stock of Ambac (ABK) on Friday:

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Source: Bloomberg Data Services

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Here’s why this is filed under category "Legal" — who on earth is painting the tape at 4:05pm more than 25% over the last price? 

Note that this was the day of the $1.5 Billion share offering . . .

Thanks, Scott!   

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UPDATE: March 10 2008, 11:00 am

My head trader tells me that there was a huge market-on-close buy imbalance, and there were attempts to find  sellers at $8.00 – 8.50, and $9.00.  No sellers appeared until $9.50, and the specialist went out short ABK for the weekend.   

Friday afternoon (3:40pm), the specialist posted a Market on Close Imbalance to Buy 8.1million shares; at 3:50, that was down to 6.7million shares.

None of the institutions were around to hit that bid at $9 ?

Current price: $7.15

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What's been said:

Discussions found on the web:
  1. david Price commented on Mar 10

    Hi Barry, Looks like a typo to me!

  2. Neal commented on Mar 10

    Fat but happy fingers?

    I have a cat like that.

  3. JustinTheSkeptic commented on Mar 10

    We have another Guru on CNBC, talking about having the government put a “floor” in the housing market. Why don’t we just let the market put the “floor” in the housing market. Isn’t that the best mechinism to use? Or are there just too many people with big, big bucks who are crying here.

  4. shortsonfire commented on Mar 10

    $9.50 was the HOD on Fri. It does sometimes happen that a trade is done during the day, but reported late (after hours).

  5. saltwater commented on Mar 10

    OT- Convertible bonds. Morningstar ran an article on long short funds. I noticed one of the funds mentioned uses convertibles. I’ve been unable to find much out about the convertible market and more specifically how it might be expected to perform in the current market environment. Any suggestions would be appreciated.

    Great blog!

  6. Lauren commented on Mar 10

    Barry,

    There was an on close buy imbalance on Friday for ABK. It is perfectly legal to place on close buy orders. The specialist used these on close orders to make a quick 25% profit. Unfortunately, the specialists do it all the time. NYSE is an extremely corrupted exchange.

  7. cinefoz commented on Mar 10

    I remember learning the difference between market orders and limit orders the hard way. Maybe that’s what happened here?

  8. Dee Leverage commented on Mar 10

    Don’t think you would paint the tape with that large a volume trade. It was probably a delayed reporting of a block trade. What is odd about that is that a delayed trade that far off the 4 PM price should not set the closing price. It has been given mostly back already.

  9. scorpio commented on Mar 10

    you know it’s not the Fed because they stopped painting the tape w Gasparino and Ambac a couple weeks ago. each scheme only has a certain half-life.

  10. APB commented on Mar 10

    Did you see Mish’s post with some charts about the action in Ambac?

  11. Todd commented on Mar 10

    I’m not a trader. Can someone please explain what the term “paint the tape” means?
    Thanks in advance…

  14. John Doe commented on Mar 10

    Whoever did this. Thank You! :)

    I got in on Friday at open for $6.51 and I got out today at open for $7.94.

  15. Paul M. commented on Mar 10

    The specialist went home short ABK?

    I bet that specialist is a happy little camper today.

  16. rishi commented on Mar 10

    i’m new here…i looked up the painting the tape link and other stuff on this event, so i think i have a fairly clear idea what happened,…. but then i am not 100% sure.

    if one of you folks could explain in simple english what exactly happened, it would be nice

  17. carlo commented on Mar 10

    I doubt the specialist sold a large percentage of the print. He probably found sellers for 90% of the print and filled in the blanks himself. That’s why the price was 9.50. The specialist took at the close all his sell side limit and market on close orders on his book plus what he was comfortable selling and the price came to 9.50. Nobody got ripped off …. that’s a market working efficiently.

    Those who had orders on the sell side represented on the book got filled up to 9.50. Others who had no orders represented on the book are crying ripoff. That’s the way it works in the real world guys ….. if your order is not represented stop crying. Next time show your interest.

  18. Paul Jones commented on Mar 11

    The culture of corruption is tentacled onto our government-business class. Presuming guilt is a pretty safe bet.

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