WHY IS CIT TRADING ABOVE $1?
Sounds familiar huh? A near certainty of a bankruptcy yet the common equity of CIT trades over $1. There once was a day when bankruptcy rumors would send a stock spiraling immediately into penny status. But recently, we’ve seen more than a few bankrupt names trade above $1 for quite some time (closed at $0.98 but trade over $1 for most of the day). Joe Saluzzi thinks he knows why:
CIT had some awful news out this morning. The stock was halted right after the opening and once reopened it tanked almost 50%. But then a magical thing happened, the stock traded back to $1 from a low of $0.75. What is so magical about $1? Any stock that trades under $1 is not eligible for a liquidty rebate from the exchanges/ecn’s. The cost to trade sub $1 stocks is FREE but you don’t get the rebate. But if the stock gets over $1, the the liquidity rebates which could be as high as $.003/share kick in. So, it appears that the high frequency traders will be desperate to keep this stock above $1 today so they can keep collecting those rebates. There is no fundamental valuation for $1, it is simply a matter of high frequency economics.
I don’t know how true these allegations are, but this is 100% manipulation if it’s the case. You have to wonder when, if ever, the SEC will start looking into the HFT rumors….
thank you, i was going to say the same thing…
hft!!!!! when will the sec do its job?????
move along, people. nothing to see here. government sachs is the good samaritan saving cit for the welfare of the country and is happy to manipulate stock prices using taxpayer-guaranteed funds for the greater good. lol
SEC, Are you listening? Obama, are you listening? I didn’t think so. Are screams fall on deaf ears to do something about this bullshit. This HFT bullshit must end!!
Anyone who has a bloomberg screen will see that this is not true, because CIT traded under $1 for most of the day, only breaking through on a sustained basis after 2pm, when volume was well off the torrid pace during the first two hours.
I have to admit that it sounds a bit like Saluzzi is grasping at straws here….The evidence is hardly convincing on his CIT report….
Saluzzi’s point is who the hell is driving it up to $1. The three stocks making up 10% of the volume of the exchanges is a much better point, imho.
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