April 28, 2009
If the SEC is serious about investigating market abuse and fraud the case study is the Dendreon (DNDN) trading on April 28, 2009. The stock tanked 50% in a matter of two minutes on an extreme volume spike and had to be halted.
1. Were they short sales that originated the collapse?
2. Were the short sales properly located or were multiple locates for the same trades used?
3. Could a mandatory pre-borrow have prevented the raid?
4. Was the selloff taking place into the bids? (Bear Raid)
5. Where were the market makers who are responsible for absorbing the unusual volume spikes? Isn't that why Market makers are given these exemptions on trading, to absorb sudden and unusual volume spikes?
It would be interesting to understand what happened and what went wrong here although we most likely will never know. Regulators are never totally transparent to events such as these because it would screw up the agenda they have with the industry members.