By Pam Martens and Russ Martens: March 26, 2021 ~

If the Securities and Exchange Commission is not taking a hard look at the involvement of Dark Pools owned by the biggest banks on Wall Street during the meteoric spike in the price of GameStop shares in late January, then we have to conclude that it doesn’t want to actually get at the truth.

Wall Street On Parade spent one hour combing through the Dark Pool trading data available through Wall Street’s self-regulator, FINRA, and the evidence of Dark Pools’ involvement in the dodgy trading in GameStop is striking. (GameStop is a New York Stock Exchange listed company and it has been trading like a penny stock operated out of a boiler room – raising questions about the integrity of U.S. markets.)

FINRA only provides Dark Pool data lumped together for an entire week, instead of on a daily basis. But even using the less-than-transparent weekly data, the correlation is striking.

From the week of December 21 to the week of January 25, Dark Pools’ trading volume in GameStop went from 4.9 million shares in total for the week to 44.1 million shares for the week of January 25 – an increase of 800 percent. The share price of the stock, likewise, went from a closing price of $15.53 on December 21 to a closing price of $193.60 on January 28 – an increase of 1,146.62 percent.

There is something else quite notable in what the Dark Pools were doing under the cover of darkness. During the week of that big spike in share price, the week of January 25, two of the biggest names on Wall Street used their Dark Pools to trade big amounts of GameStop shares. UBS’s Dark Pool ranked number one in both share volume and the number of trades. It traded 10.66 million shares of GameStop in a total of 217,118 trades. One of JPMorgan Chase’s Dark Pools, JPM-X (the SEC allows it to have two Dark Pools) ranked number two for the week with 5.15 million shares of GameStop traded in a total of 30,835 trades.

But here’s what doesn’t make sense about those numbers. Both UBS and JPMorgan Chase focus on institutional and high net worth clients. If you divide the January 25 weekly share volume for UBS by the number of trades, it works out to an average trade size of approximately 49 shares – an odd lot. If you do the same for JPMorgan’s Dark Pool, it works out to an average trade of 167 shares.

These are institutions that should be trading in lots of 1,000 to 10,000 shares – which raises the question, what was really going on here?

Both JPMorgan and UBS were charged with rigging prices on Nasdaq by the Justice Department in 1996. UBS was charged by the Justice Department for rigging the Libor benchmark interest rate in 2015. JPMorgan was charged by the Justice Department and admitted guilt to rigging foreign exchange trading in 2015 and fraudulent trading in the precious metals and U.S. treasury markets in 2020. JPMorgan Chase has in the past seven years admitted to five felony counts brought by the U.S. Department of Justice, including the three cases mentioned above. And yet, the SEC thinks this Wall Street mega bank should be allowed to trade in darkness in two internally operated Dark Pools.

GameStop is a brick-and-mortar video game retailer with a very uncertain future. The company reported negative earnings for 2018, 2019 and 2020.