Equity games get more frequent on Rasdaq

The value of loans performed on Rasdaq market and guaranteed by transfers of stakes amounts to about 11 billion lei, over six times higher than the guaranteeing fund for transactions on this market.

Similar to other mechanisms meant to artificially inflate values, this system has also reached remarkable dimensions, exceeding thus the fund’s possibilities to guarantee transactions from the National Compensation, Payment and Depositing Company (SNCDD) that operates payments on Rasdaq.

“The problem is that the same stake moves during the same day with different terms, posting increasingly higher prices, while SNCDD can only wait for the securities companies involved to make the payments,” Maria Buga, head of the capital markets department within BRD-SocGen, told Ziarul Financiar.

This game is similar to the one played by kids throwing a hot potato from one to another, until one of them gets burned. The only problem is to prevent banks or market institutions from being gulled and lose credibility.

“Such transactions can be considered market manipulation, a fact that is penalised by fair practice rules (RPO). Yet, these rules are not applied,” market sources told Ziarul Financiar.

To effectively operate such a loan, one needs to conclude two transactions, a sale and a purchase deal, which, as a rule, take place during the same day.

A buying transaction is closed during the first stage. Payments for this operation are made, according to SNCDD rules, in line with one of the stipulated terms, that is one, two or three days after the date the transaction was closed. However, during the same day, a reverse operation takes place. This is a sale operation, at higher prices and with a much more generous payment term, for instance 30 days.

The difference between the selling and the buying rates constitutes the interest negotiated between the two partners of the sale-purchase operation on the period of the loan, before the transfer is effectively concluded.

This system introduces however an extraordinary distortion of trading prices, which eventually lose all connection to the real situation of the respective companies, turning Rasdaq into a ring of risky speculations.

A simple protection method against such transactions would be introducing some limits for daily price variation, similar to those implemented at the Bucharest Stock Exchange.

There have been numerous stocks that registered daily leaps of over 1,000% on Rasdaq and they have been excluded from the calculation of the official index so that things may seem all right. The decision of Rasdaq authorities to ignore some daily high variations cannot bring Rasdaq any credibility.