Upfront Investor – Trades in Secret

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We all like a level playing field, but when it comes to the share market ordinary investors are questioning whether the market is fair. Markets need to be fair and transparent for all players, not just the big players, and this is something that ASIC and the ASX strive to achieve. But is this what we’ve got? I believe the reality sits in a grey area that is not necessarily beneficial for all players.

Currently, large institutions can place transactions in dark pools which to some degree hide what they are doing, and this situation is set to worsen with the new Chi-X exchange in our market. In the interests of transparency and a fair market we need to ask if institutions should be made to transact on the open market rather than carrying out their business behind closed doors.

Alternatively, if it is allowed to continue, should these institutions be made to alert the market once the trade has completed? Further to this, should the minimum to be traded in a dark pool be much higher than what is being proposed at $50,000, which seems well short of the mark. Perhaps a $1.0m minimum needs to be considered.

Dark pools are having a massive impact on the liquidity of the market and will reduce it further if institutions get their way. It seems to me that we need tighter rules on these dark pools as those using them are not limiting transactions to what they were originally designed for. The GFC showed how, without the right regulation, there will always be some who stretch the boundaries between what was actually possible and what is fair. In the end it is normally the little people that lose out.

What do we expect in the market?

This week the big money continued to push the market both up and down, adding to indecision that is being felt by investors right now. Rather than being fearful, this is a time to look at the market with a great deal of interest as the current activity is really just confirming what I have been saying for a few weeks about the resistance at 4400 holding the market back.

What occurred this week is a sign that the market is performing in a more typical fashion, and we can be a little more positive as it has now traded above the high in December 2011, which was a necessary step if the market is to continue higher.

My short term analysis indicates that the market is running out of time to move up to its yearly high and needs to make the next move within the next two to six weeks. If this fails to occur the risk increases for the support it has been building over recent months to be broken. For now, I suggest a staged approach to entering into the market, to keep your risk at acceptable levels.

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Dale Gillham

Chief Analyst, Wealth Within

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’, has assisted thousands of traders and investors to learn to trade shares and become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment advice to traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma and Advanced Diploma of Share Trading and Investment.For more information please visit www.wealthwithin.com.au