Other ASX Research 2

1
CuDECO SHAREHOLDER RESEARCH

CHAPTER 7:
ISSUES IDENTIFIED BY CUDECO SHAREHOLDER RESEARCH
AS THEY IMPACT OTHER ASX COMPANIES

7.2 Research Findings in Relation to Linc Energy (LNC)

DISCLAIMER: All Information presented as shareholder research has been sourced from
broker trading records and Cudeco registry records. While the author considers the data
to be accurate and the summaries presented as also being an accurate reflection of
trading, no guarantees are given as to the reliability of data or any conclusions put
forward. Shareholders and investors are encouraged to do their own Due Diligence and to
make up their own minds in regard to any trends present in the trading data.
DISCLAIMER: All information presented as shareholder research has been sourced from
broker trading records, CuDeco registry records and official data as published by the ASX
and ASIC on their respective websites. While the author considers the data and the
summaries presented as being an accurate reflection of trading, no guarantees are given
as to the reliability of information presented. The author provides the information as a
free educational service for those with an interest in the financial markets and requests
that the information contained is used for private use only. No remuneration is involved
in making the research available. It is hoped that the research may assist ASX investors in
becoming more fully informed and in a position to make better judgements about events
that might affect their investments.
Contact Email:
asx.trading.issues@gmail.com
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REFERENCE LINKS TO PREVIOUS RESEARCH PAPERS

Chapter 1: Introduction
1.1 Why Blog?
1.2 The Current Situation
1.3 Blog Content
Chapter 2: An Overview of Trends Associated With 15 Months of Trading
2.1 Introduction
2.2 Trading Trends Over a 15 Month Period
Chapter 3: Trading Trends Leading up to Aug 18, 2010
3.1 Trading Leading Up to the Aug 18 Resource Upgrade
3.2 An Analysis of Price Under-Performance During Jan-Feb 2010
3.3 Market Manipulation Issues, 7.5 Months of Auction Investigations and Down Tick Analysis
3.4 A Review of June/July 2006 JORC Issues
3.5 Market Reactions to Significant Announcements 2010
3.6 The 2010 Resource Estimate and Issues Related to JORC Code Compliance
Chapter 4: Trading that Occurred Following the Aug 18, 2010 Resource Upgrade
4.1 Historic Trends and Aug 18, 2010 Trading Data
Chapter 5: Trading Updates
5.1 Short Position Update - Nov 1, 2011
5.2 Registry Update as at Nov 3, 2011
5.3 Market Update Nov 14
5.4 Summary of Issues Plus Trading Anomalies During November 2011 and in a Broader Context
Chapter 6: Registry Anomalies
6.1 An Overview of Monthly Registry Anomalies Spanning 2 Years of Trading
6.2 Increased Registry Activity Versus ASX Buying and Selling
6.3 Trading Featuring Substantially Increased Registry Activity Over ASX Activity - Part 2
6.4 Trading Featuring Substantially Increased ASX Activity Over Registry Activity.
6.5 The Impact of Institutions on the CuDeco Register
Chapter 7: Research Into Other ASX Companies
7.1 Research Findings in Relation to CDU, LYC, BBG and EGP
7.2 Further Research Into ASX 200 Companies - Linc Energy (LNC)

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EXECUTIVE SUMMARY
The research into Link Energy confirms and expands the findings associated with other companies that has
identified a number of areas which are stripping wealth from retail investors and destroying confidence and
participation in the market system by mum and dad investors looking to build retirement nest eggs.
Dubious trading practices leading to gross undervaluations are also making it difficult for companies to
access finance to develop significant national and international projects without causing massive dilution
to other shareholders. Accompanying the dilution is a shift in ownership of Australian companies with
control passing to overseas interests or multinational companies whereby any future profits generated in
Australia will be increasingly repatriated overseas. The undervaluations forced onto companies through
dubious short selling practices are particularly evident in the case of Linc Energy through 2012.
Issues regarding Linc Energy that have been highlighted by research include:
Reporting anomalies that reveal persistent inconsistencies between official data regarding short
selling and official data regarding securities lending;
Poor price performance for most of the 3 years of trading reviewed, but especially through 2012.
Data trends suggest that share price weakness appears to be the result of either collusion between
brokers, or entities using multiple brokers to achieve their trading objectives in a way that has
implications for the fairness of trading, and indeed, the fairness of the market for all other
investors. Anomalies with trading are able to be identified and assessed through the declarations
made available in substantial shareholder notices.
Share price manipulation issues stemming from what appear to be unreasonable levels of short
selling that resulted in dramatically lower prices during 2012:
o where at one stage a 65% reduction in price was accompanied by a 583% increase in open
short positions, which was followed by;
o large volumes of short covering occurring off-market without price impact, followed by;
o a dramatic and sustained rise in the share price.
Such events are rarely coincidences in markets that are dominated by the trading of sophisticated
investors.
The failings of a system that can allow entities to become substantial shareholders through
securities lending activity with the express purpose of destroying value for all other holders. Such
events in the case of Linc Energy seem to have been accompanied with the support of other
sophisticated shareholders who acquiesce their positions to facilitate both the building of short
positions through borrowings and the unwinding of positions through lending or by the exchange of
shares off-market without price impact the situation reports more to collusion between major
trading entities than genuine lending;
The building of extreme short positions by entities provides strong incentives to control pricing
levels, if only to protect exposed positions. At risk are the value of holdings that are based on
borrowed stock and the value of collateral advanced, which in turn may be used to facilitate further
short selling. Securities lending dealings can be extremely convoluted and intertwined so that
collectively, institutions engaged in securities lending can have a mutual interest in the orderly
building and unwinding of positions. However the implications of such activity align more with
market management, collusion and share price manipulation than fair trading. And as already has
been highlighted by research, there are many ways in which control over prices can be achieved.
(Refer Research Paper 6.1, Pg. 35 and Section 7.2.1.16 of this Paper).
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Concerning anomalies associated with substantial shareholder data whereby:
o UBS appear to be involved with share price activity that resulted in a price query but didnt
report pertinent substantial shareholder activity until several weeks after the event;
o The trading of UBS affiliates as substantial shareholders has been contradictory to the
profile of their broker in the market. The data trends suggest collusion between brokers
while the positions held by affiliates are established and also when the holdings are sold
down;
o The trading of Credit Suisse affiliates also shows contradictions between the activities of
affiliates with other brokers as substantial shareholders, compared to the trading
undertaken by broker Credit Suisse;
Overall Commonwealth Securities were the prominent broker with the bulk of institutional trading
camouflaged amongst the largest retail broker, perhaps to take the spotlight off the impact that
large institutional orders have had on the market;
Issues that may have implications for insider trading where major share movements have occurred
by entities associated with the company immediately prior to a significant announcement by the
company regarding finance;
Control over prices as highlighted by anomalous down tick trends and auction trends;
Large volumes of shares continually passing back and forth between particular brokers that have no
measurable impact on the register mainly because of the opaque dealings associated with
institutional trading. The trends over the last few years can be summarized as
o Instinet being the major net buyer in 2013 with Credit Suisse the major net seller;
o Instinet as the major net buyer again in 2012 with a range of brokers as net sellers;
o Austock as the major net buyer in 2011 and UBS as the major net seller, and;
o UBS & Citigroup as the leading net buyers in 2010 and BBY and Deutsche Bank the major net
sellers.
All the while it has been Commonwealth Securities who has been the prominent broker by a very
wide margin. Its overall market share of 17.2% compares to Citigroup (10.8%) and Deutsche Bank
(7.8%). Surprisingly, the substantial shareholder changes announced to the market generally relate
to brokers with much reduced trading profiles. Complicating attempts to reconcile trading is the
fact that the trading of the leading brokers cannot be connected to the trading activity of their
clients because of the practice of settlements being attended to separately by specialist agents or
custodians, not the brokers responsible for the buying and selling.
The situation raises serious concerns as the entities actually responsible for large volumes of share
flows are unable to be traced from either broker records or registry records making effective
regulation problematical at best.
Persistent anomalies evident in trading data overwhelmingly lead one to conclude that just because
no major broker firm has been held to account for trading irregularities over the last several years it
doesnt mean that share market manipulation doesnt occur. The problem seems to be that the
dubious or unacceptable trading behaviours signalled by trading anomalies, are either sanctioned
by current trading guidelines and current regulatory provisions, or they are simply too difficult to
expose and prosecute. The opaqueness of trading conducted by sophisticated investors is the
central problem that prevents entities from being identified and made accountable. The situation
has enormous ramifications for both market integrity and confidence in the market system itself.

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CONTENTS

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7.2.1 AN OVERVIEW OF LINC ENERGY TRADING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.2.1.1 CHARTS - SHARE PRICE & OPEN SHORT POSITION TRENDS (Jun 16, 2010 to Dec 31, 2012) . . . 9
7.2.1.2 LINC ENERGY YEAR BY YEAR SHAREHOLDER CHANGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.2.1.3 ANOMALIES ASSOCIATED WITH SUBSTANTIAL SHAREHOLDER NOTICES . . . . . . . . . . . . . . . . . . 10
7.2.1.4 SUBSTANTIAL SHAREHOLDER ACTIVITY ASSOCIATED WITH UBS AFFILIATES . . . . . . . . . . . . . . . 11
7.2.1.5 SHORT SELLING DATA THROUGH MAY 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.2.1.6 SECURITIES LENDING DATA THROUGH MAY 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.2.1.7 SHARE PRICE TRENDS CORRESPONDING TO UBS SUBSTANTIAL SHARE HOLDER STATEMENTS 19
7.2.1.8 BROKER TRADING DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.2.1.9 TRADING DATA ASSOCIATED WITH THE COVERING OF SHORTS . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2.1.10 OPEN SHORT DATA COMPARED TO STOCK LENDING & STOCK BORROWING DATA . . . . . . . . 28
7.2.1.11 SUBSTANTIAL SHAREHOLDER ANOMALY : Dec 24, 2012 to Jan 18, 2013 . . . . . . . . . . . . . . . . . . 29
7.2.1.12 SUMMARY OF TRADING: Concerning Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.2.1.13 FURTHER SUBSTANTIAL SHAREHOLDER ANOMALIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.2.1.14 THE INSTUTUTIONAL PRESENCE AMONGST RETAIL BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.2.1.15 LEADING BROKERS ACROSS ALL TRADING: Period Jan 2010 to April 25, 2013 . . . . . . . . . . . . . 47
7.2.1.16 CONTROL OVER PRICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.2.1.16.2 DOWN TICK TRENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.2.1.16.3 CONTROL OVER AUCTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.2.1.16.4 AUCTION SUMMARIES FOR ALL OF MAY 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.2.1.16.5 CONCLUDING COMMENTS . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
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INTRODUCTION

Research into Linc Energy has broadened the extent of data anomalies already established in relation to
CuDeco, Lynas Corporation, Billabong Corporation and Echo Entertainment. The picture that is emerging
portends serious issues for the wellbeing of financial markets and more importantly for the safety of retail
investments and the investments of individuals who have funds under management. Retail investors find
themselves at the mercy of relentless and possibly unscrupulous trading activity undertaken by
sophisticated investors. The odds of success for retail investors in todays markets have been severely
diminished through trading privileges afforded to sophisticated investors and through the superior trading
systems that they have access to. Also at issue is the tolerance of regulators in allowing trading
irregularities to stand despite the widespread acknowledgement of problems within the system. The
problems stem from technological trading innovations which havent been thought through before
implementation and which cannot be effectively monitored and regulated within existing arrangements.
The problems date back for at least a decade yet very little has been done to address what research is
revealing to be system wide problems, not just company specific issues.
Dubious trading behaviours appear to be tolerated because they somehow fall within existing trading
guidelines. However a reluctance to amend archaic guidelines that are not able to appropriately address
issues stemming from technological innovation and which are now widely acknowledged is patently
unacceptable.
Data anomalies continually suggest that current guidelines are deficient and in desperate need of an
overhaul. The flexibilities that provide safe package to what present as unscrupulous practices need to be
removed. There must also be a level playing field for all investors and it is incomprehensible that current
inequities have been allowed to exist without an effective review for such a long time.
Reform needs to address the following aspects of trading that have all been highlighted by research.
The practice of short selling on-market and managing and reducing open short positions off-
market; a practice that allows short selling to lower prices while short covering avoids price
discovery;
The use of trading algorithms
o in controlling price movements between groups of brokers,
o in controlling auction outcomes,
o in trading back and forth large parcels of shares between obvious trading affiliates with
orders spread across multiple brokers,
o in front running orders forcing retail investors to pay more for shares and to accept less
when selling,
o in withdrawing liquidity at crucial times
o in dumbing down the market through issuing and cancelling bids in rapid succession,
o in placing false bids and withdrawing them as soon as there is a chance of execution,
o in facilitating back and forth trading between affiliates that results in little change to
beneficial ownership despite large volumes put through the market. Such trading appears to
be stepping provisions that ban wash sales.

7

The effectiveness of the regulatory system has been brought into focus recently with a declaration that they
dont have any issues concerning the use of HFT algorithms. Retail investors would no doubt beg to differ and
their declining interest in the market is likely to be signalling their frustration if not their disgust.

The practice by institutions of distributing their buying and selling across multiple brokers and in so
doing generating a market structure that is extremely unfair, extremely misleading , difficult to
monitor and difficult to reconcile with those responsible for market trends. Principal trading
entities are able to impact the market virtually unnoticed and undetectable while controlling pricing
outcomes according to whatever agendas they might have.
The acute lack of transparency that exists across the market as exemplified by the activities of
sophisticated investors acting within the nominee structures of institutions. Fundamental efficient
market theory based on assumptions of genuine buying & selling, fair trading, market transparency
and for entities to be accountable for their actions, are mostly absent from the current trading and
reporting systems that make up our financial markets;
The trading anomalies associated with dark pools and off-market transfers which include the
impact on price discovery, the facilitation of trades between brokers who appear to be colluding
with their trading, and the withdrawal of liquidity from the lit market;
The systems of reporting for short selling and securities lending which appears unreliable and often
misrepresentative of what is actually taking place. A system that admits that official reports cannot
be regarded as reliable suggests that there is little chance of effective regulation taking place.
The research into Linc Energy supports all of the above issues and also makes the point that if substantial
shareholder disclosures can provide a view of the market that is fraught with inconsistencies and potential
trading issues, then the majority of the trading taking place is likely to be similarly affected.
In summary, it would appear that an assessment of the market through the lens of trading and reporting
data can only conclude that official sector affirmations that claim that the market is fair, transparent and
acts with integrity and that there are no problems with HFT trading algorithms are seriously in error. In fact
persistent and widespread anomalies in trading data and current reporting facilities are likely to be
signalling gross failures within the current market system.

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Section 7.2.1
AN OVERVIEW OF LINC ENERGY (LNC) TRADING

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7.2.1.1 CHARTS - LINC ENERGY (LNC) - Share Price trends and Open Short trends from Jun 16, 2010 to Dec 31, 2012

7.2.1.2 YEAR BY YEAR SHAREHOLDER CHANGES (from Annual Report Top 20 Lists)

Share Price

$3.00

$2.00

$1.00

$0.50
Open Shorts
30 mill
20 mill
10 mill

Massive short covering
without price impact
Flat share price as
covering took place
LNC SHAREHOLDERS 2010 2011 2012
HSBC Nominees 34,233,555 45,703,332 30,279,801
J P Morgan Nominees 31,785,771 32,140,832 22,279,599
Citicorp Nominees 24,604,386 25,951,968 8,465,060
National Nominees 18,796,600 32,881,038 36,065,525
UBS Wealth 11,260,550 45,890,391

Perpetual Custodians 8,761,181 6,944,184 6,150,961
ANZ Nominees 2,846,196

Bond St Custodians 2,716,659 1,822,000

CS Fourth Noms 2,483,470

Merrill Lynch
Nominees
1,319,776 1,285,264 1,494,987
AMP Life 1,248,110 2,169,008 1,396,861
Share Direct
Nominees
0 5,121,139 0
UBS Nominees

1,267,633 16,074,296
QLD Investment Corp

1,460,181
Newtron Pty Ltd 189,923,903 156,923,904 162,000,000
Marubeni Coal 7,371,000 7,371,000 7,371,000
Greg Ricato 1,396,861
WK Prospecting 511,900
Steven Fierro 4,847,005 4,847,005 4,847,005
Andrew Tomkins 2,285,000 2,286,000 2,286,000
Khotam Tafji-Aglaev 1,301,207

Statistics 2010 2011 2012
Total Register 496,442,861 508,758,205 510,000,000
Top 20 344,995,062 373,905,905 301,568,137
Top 20 % 69.5% 73.5% 59.1%
Institutions 140,056,254 201,176,789 123,667,271
% Top 20 40.6% 53.8% 41.0%
% Register 28.2% 39.5% 24.2%

While institutions do not control as much of the Linc
register as they do most other ASX200 stocks, short
selling has still been a prominent feature of trading
accompanying share price falls. The company share price
lost 82% of its value between June 2011 and Aug 2012 as
short positions increased from 6 million to 45 million.
Also, open shorts decreased from 45.2 million on Aug 15,
2012 to 4.7 million on Oct 15, 2012 just prior to a strong
uptrend in price following strong news. The impeccable
timing in relation to open short reductions points toward
insider activity.
Dec 12, 2012: Linc shares surge 25%
Jan 8, 2013: Linc shares surge on production news

Short positions have since been reinstated through Dec
2012 and early 2013 although only to the 16 million level.
Volatility due to off-
market adjustments?

Share Price
Decline of 82%
10

7.2.1.3 ANOMALIES ASSOCIATED WITH SUBSTANTIAL SHAREHOLDER NOTICES: May to July 2011
There are a number of anomalies associated with the trading during May 2012. The share price came
under pressure at the same time there was a dramatic increase in open short positions indicating high
levels of shorting taking place.
Charts for both the Share Price and Open Short positions during May 2012 are provided below.

7.2.1.3.1 ASX PRICE QUERY: MAY 23, 2012
We have noted a decrease in the price of the Companys securities from a close of $0.685 on 22 May
2012 to an intraday low of $0.61 today, at the time of writing. In light of the price change, is the
Company aware of any information concerning it that has not been announced which, if known, could be
an explanation for recent trading in the securities of the Company?

There were several other questions presented as well. The price query ignored the fact that since May 1,
2012, the share price had fallen a very substantial 51 cents or 46%.

10
15
20
25
30
35
May
1
May
2
May
3
May
4
May
7
May
8
May
9
May
10
May
11
May
14
May
15
May
16
May
17
May
18
May
21
May
22
May
23
May
24
May
25
May
28
May
29
May
30
May
31
M
i
l
l
i
o
n
s

$0.50
$0.60
$0.70
$0.80
$0.90
$1.00
$1.10
$1.20
ASX price query on May
The share price declined by
46% before the company was
queried by the ASX
Open shorts increased by 92%
over the course of the month
OPEN SHORTS
SHARE PRICE

May 1 May-23 % Change May-31 % Change
Price $1.11 $0.60 -46% $0.76 -32%
Open Shorts 17,175,574 30,845,123 +80% 33,055,387 +92%

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THE COMPANY RESPONSE TO THE PRICE QUERY:
The company in its response confirmed that the market was trading fully informed with no matters
outstanding and that the under-valued share price was an on-going problem. It had the following to say:
The Company considers the current market cap, as reflected by the current share price, to be multiples
lower than the underlying asset-backed value of the business. Recent analyst reports reinforce the
Companys view on the value of the business. The Company confirms previous market guidance with
respect to targeted oil production and cash management expected to be achieved by 31 December 2012.

7.2.1.4 SUBSTANTIAL SHAREHOLDER ACTIVITY ASSOCIATED WITH UBS AFFILIATES
A late lodgement by UBS AG Hong Kong Branch on June 14, 2012 indicated that UBS became a substantial
holder on May 16, 2012 and its status as a substantial holder also fluctuated throughout the rest of May.
They were active in the market in the months leading up to May as well. Their notice on June 14 contained
an apology for late disclosure brought about by clerical errors. The substantial shareholder disclosures
provided by UBS were as follows.
24/05/2012 Company Response to ASX Price Query PDF
15/06/2012 UBS- Becoming and Ceasing to be a substantial holder PDF
15/06/2012 UBS- Becoming substantial and then Change in substantial shareholding PDF

SUB NOTICE 1: The first of two notices put out on June 15 contained the following statement.

7.2.1.4.1 UBS BECOMING A SUBSTANTIAL HOLDER:
The 5.01% holding achieved on May 16 amounted to 25,275,714 shares. The substantial holder status was
the result of net share flows associated with an extremely large number of transactions. The transactions
included buying and selling but also included large volumes of securities lending transactions. The
securities lending share flows resulted from stock being borrowed and returned for short selling purposes
but also with Linc shares being received and returned as collateral. The collateral share flows implies the
lending out of other shares by UBS affiliates where Linc shares have been put up as collateral to secure the
loans. The situation requires clarifying given the large volumes involved.

The disclosure consisted of over 80 tables of difficult to interpret information which would have made any
regulatory audits extremely problematical.

Nevertheless a check of what was provided has resulted in the following indicative summary for trading
from mid-January 2012 to May 16, 2012 at which time UBS became a substantial shareholder.

12

Market Trading Securities Lending - Collateral Securities Lending - Borrows
Sells Buys Collateral Out Collateral In Shares Returned Shares Borrowed
OFF ON OFF ON OFF ON
29,311,901 32,603,895

179,285,408 173,575,111

5,283,887 9,923,355
The remarkable feature of the disclosure is the impact that securities lending has had on UBS becoming a
substantial shareholder. In terms of total movements into UBS control (shaded blue) and out of UBS
control (shaded pink) , the various share flows can be summarized as follows.

Collateral 82%
Borrowing 4%
Trading 14%

The net share flows over the period are summarized below, suggesting that an increase of 2.2 million
shares has led to UBS becoming a substantial shareholder with a holding of 5.01%.
OFF ON Net
213,881,196 216,102,361 2,221,165

A sample of the data is provided below. The actual notice is available from the following link refer PDF

The data raises queries about what
impact securities lending may have
had on the Linc share price
Share Flows: Jan 19 to May 16

13

UBS became a substantial holder on June 16 but ceased the next day with net share flows reducing control
to just under 5%. The transactions that have been provided for May 17 total as follows.

MAY 17 Share Flows Securities Lending - Collateral Securities Lending - Borrows
Sells Buys Collateral Out Collateral In Shares Returned Shares Borrowed
343,954 315,373 22,248,488 21,944,718 0 0

Based on the 5.01% disclosure for May 16 net movements of 332, 351 shares away from UBS control would
have registered a drop in UBS holdings to 4.94%
OFF ON Net
22,592,442 22,260,091 -332,351

7.2.1.4.2 UBS SUBSTANTIAL HOLDING NOTICE FOR MAY 18 (also released on June 15)
The second notice released on June 15 advised of substantial shareholder status again occurring on May 18
and also contained a clarifying statement.

The trading summay for May 18 shows net share flows of 1.29 million shares moving under the control of
UBS affiliates bringing their substantial shareholder status to 5.26% of the register. The movements are
again dominated by Linc shares being received and returned by UBS affiliates as collateral.

7.2.1.4.3 SUBSTANTIAL HOLDER INCREASE TO 6.31% ON MAY 30, 2012
Trading from May 19 to May 30 resulted in the substantial shareholder status of UBS increasing to 6.3%
with share flows associated with collateral again being a dominant feature of trading.
Also of notice were the short covering purchases that occurred and the return of borrowed stock at a time
when the share price was falling for no good reason as per the companys response to the ASX query.

MAY 18 Share Flows Securities Lending Securities Lending
Sells Buys
Collateral
Out
Collateral
In
Shares
Returned
Shares
Borrowed
1,975,010 3,169,540 5,671,637 5,764,856 0 0

OFF ON Net
20,949,635 25,357,549 4,407,914

MAY 19 to May 30 Securities Lending Securities Lending
Sells Buys
Collateral
Out
Collateral
In
Shares
Returned
Shares
Borrowed
2,247,319 7,758,207 11,939,790 14,199,342 6,762,526 3,400,000

OFF ON Net
7,646,647 8,934,396 1,287,749

14

7.2.1.4.4 COMMENT:
An honest mistake is one thing but there are significant issues surrounding UBSs presence in the market
leading up to May and then through the month of May itself.
The issues relate to:
Substantial shareholder status largely coming about because of heavy involvements with securities
lending, particularly in regard to share flows associated with collateral;
Disclosues that were delayed by almost a month resulting in a market that was misinformed during
a time that the share price was under pressure for reasons not apparent to the company ;
A significant increase in holding by UBS during a period that has attracted the concern of regulators
because of share price falls, and;
The levels of paper shuffling taking place which has avoided price discovery. For example the
following data tracks shares swapped back and forth as collateral day after day for reasons obscure
to the market and with implications unable to be assessed without the auditing of accounts.

High levels of short sales that contributed to increases in open short positions and price falls in Linc
shares, at a time when by the companys admission the share price was already undervalued.
The issues when contrasted against the share price under performance over the time UBS was active in the
market as a substantial shareholder raise concerns about the impact on the share price of large scale
securities lending. The large volumes of share flows associated with Linc shares being used as collateral
suggest some unknown entities may have strong reasons to manage the share price to protect exposed
positions. Such activity would have led to a compromised market as suggested by inexplicable share price
falls.
7.2.1.4.5 FURTHER SUBSTANTIAL SHAREHOLDER NOTICES BY UBS
UBS were again active in the market during June and July resulting in the following additional substantial
shareholder notices.
13/07/2012 UBS - Change in substantial holding PDF

The data, although difficult to interpret because of the way it has been presented in the notice, again
draws attention to the heavy involvement by UBS with their securities lending activity compared to their
levels of buying and selling in the market. The use of undisclosed derivative dealings has also contributed
to the increase in substantial holding by UBS in compensating for the net selling that took place.

Summary of July 13 Data Securities Lending Securities Lending Derivative Dealings
Sells Buys
Collateral
Out
Collateral
In
Shares
Returned
Shares
Borrowed
Shares
Relinquished
Shares
Accessed
OFF ON OFF ON OFF ON OFF ON
5,709708 3,093,674 70,474,610 73,376,241 1,673,346 3,135,500 0 2,650,000

The inflow of 4.4 million shares
boosted substantial ownership
to 7.36%
Overall Share Flows
OFF ON NET
77,857,664 82,255,415 4,397,751

Day
Collateral
Out
Collateral
In
Day
Collateral
Out
Collateral
In
Day
Collateral
Out
Collateral
In
Jan 25 6,752,746 3,445,360

Mar 15 3,329,615 1,692,922

May 14 5,130,351 54,412
Jan 26 1 3,233,898

Mar 16 4,702,033 3,906,070

May 15 3,329,605 1,692,552
Jan 27 3,327,924 211

May 13 4,927,414 7,755,423

May 16 4,163,393 4,797,018

15

The net share flows for the period is summarized below.
NET Share Flows
Buying & Selling Activity -2,616,034
Collateral share flows +2,901,631
Borrowing Activity +1,462,154
Derivatives Share flows +2,650,000
Totals 4,397,751

7.2.1.4.6 COMMENT:
The data highlights how the simple process of buying and selling has been complicated in modern markets
by the ability of entities to deal in shares that they dont own and by the use of exotic derivative
arrangements that escape scrutiny. A key concern is whether through securities lending and the short
selling that it expedites, powerful interests may be able to exercise unfair levels of control over the market.
Research data overwhelmingly suggests that such control is readily achievable particularly if entities are
acting collusively with their trading and where trading objectives are facilitated by algorithms, dark pool
exchanges, and the flooding of the market with buy and sell orders that are distributed across a large
number of brokers. Off-market adjustments to exposed positions are also a regular feature of daily
operations and provide the flexibility to rebalance holdings in dealings that are opaque to the market and
which avoid price discovery.
Certainly the complexity of dealings through a period marked by share price volatility does not augur well
for market integrity nor does it support the foundational premise that underpins the market itself, and that
is that the market is meant to be able to provide fair discovery between genuine buyers and genuine
sellers.
7.2.1.4.7 THE JULY 16 UBS SUBSTANTIAL HOLDER NOTICE:
The return of collateral the day following the July 13 increase to holdings, resulted in a fall in substantial
shareholder status by 8.6 million shares. The details are as follows:
Sells Buys
Collateral
Out
Collateral
In
Shares
Returned
Shares
Borrowed
Shares
Relinquished
Shares
Accessed
418,927 310,296 8,871,404 0 0 300,000 0 100,000

Overall Share Flows
OFF ON NET
9,290,331 710,296 -8,580,035

7.2.1.4.8 THE JULY 17 UBS SUBSTANTIAL HOLDER NOTICE:
The receipt of collateral the day following the July 16 statement together with the borrowing of shares,
resulted in an increase in substantial shareholder status by 6.44 million shares. The details are as follows:
Sells Buys
Collateral
Out
Collateral
In
Shares
Returned
Shares
Borrowed
Shares
Relinquished
Shares
Accessed
324,453 27,415 592,430 3,431,524 700,000 4,600,000

Overall Share Flows
OFF ON NET
1,616,883 8,058,939 6,442,056

The outflow of 8.6 million
shares reduced substantial
ownership to 5.72%
The inflow of 6.44 million
shares boosted substantial
ownership to 6.93%

The substantial share flows of around 6.4 million shares resulted not from buying and selling activity but
from the borrowing of shares and from the receipt of Linc Energy shares as collateral.

16

7.2.1.4.9 SUMMARY OF THE UBS INVOLVEMENT IN LINC ENERGY: Period Jan 19, 2012 to July 17, 2012
The tables that follow summarize share flow information as revealed by substantial shareholder disclosures
that span the 6 months of trading from Jan 19 to July 17, 2012. While difficult to process because of the way
data has been presented in substantial shareholder notices the tables below are provided on a best
endeavours basis in the interests of market transparency.
The outstanding feature of trading is the extent of securities lending transactions that have taken place.

Trading
Activity
Securities Lending
(Collateral)
Securities Lending
(Stock Borrowing)
Derivative
Dealings
Disclosure OFF ON OFF ON OFF ON OFF ON
May-16 29,311,901 32,603,895 179,285,408 173,575,111 5,283,887 9,923,355 0 0
May-17 343,954 315,373 22,248,488 21,944,718 0 0 0 0
May-18 1,975,010 3,169,540 5,671,637 5,764,856 0 0 0 0
May-30 2,247,319 7,758,207 11,939,790 14,199,342 6,762,526 3,400,000 0 0
Jul-13 5,709,708 3,093,674 70,474,610 73,376,241 1,673,346 3,135,500 0 2,650,000
Jul-16 418,927 310,296 8,871,404 0 0 300,000 0 100,000
Jul-17 324,453 27,415 592,430 3,431,524 700,000 4,600,000 0 0

40,331,272 47,278,400 299,083,767 292,291,792 14,419,759 21,358,855 0 2,750,000

Activity ON OFF NET Share Flows

Percentage
Buying & Selling 40,331,272 47,278,400 6,947,128

12.2%
Collateral Share Flows 299,083,767 292,291,792 -6,791,975

82.4%
Borrowing Share Flows 14,419,759 21,358,855 6,939,096

5.0%
Derivatives Share flows 0 2,750,000 2,750,000

0.4%
Totals 353,834,798 363,679,047 9,844,249

100%

7.2.1.4.10 CHART COMPARING UBS BUYING & SELLING TO SHARE FLOWS RESULTING FROM OTHER UBS ACTIVITIES

The Linc Energy chart has parallels to UBS trading in Billabong Corporation as well as NAB trading in both
Echo Entertainment and Billabong Corporation, all highlighted in Research Paper 7.1. The charts all
demonstrate a disproportionate amount of securities lending share flows by substantial holders compared
to buying & selling in the market. The situation has enormous ramifications for market integrity.
Buying & Selling
Activity
Collateral Share
Flows
Borrowing Activity
UBS dealings in relation to Linc Energy

Section: 7.1.3.10.7

UBS in relation to BBG

NAB in relation to BBG

NAB in relation to EGP

Section: 7.1.3.8.1.5.3

Section: 7.1.4.3.8

Securities
Lending
Buying &
Selling
17

7.2.1.5 SHORT SELLING DATA THROUGH MAY 2012
The table summarizes short selling and open short position data for Linc Energy for the period May 1 to
May 30, 2012 and includes an estimate of short covers that have occurred. Anomalous data which points
to off-market adjustments to short positions has again been highlighted by shading in the same way used
in previous research. (Refer Research Paper 7.1 Section 7.1.2.6.2 for the estimation method used)
Yellow shading signifies that additional off-market transactions have been responsible for adjustments to
short positions over and above any covering purchases undertaken on-market. Pink shading indicates
where off-market short covering has been undertaken over and above the 50% assumed to come from
daily buying activity.
May
2012
ASX Volume
Reported
Short Sales
Reported
Shorts %

Estimated
Covers
Estimated Covers as a
% of ASX Volumes

Open
Shorts
Change to
Shorts
May 1 1,035,600 138,090 13% 39,159 4% 17,175,574 98,931
May 2 2,111,400 458,888 22% 3,397,423 161% 14,237,039 -2,938,535
May 3 1,986,800 1,167,918 59% 351,745 18% 15,053,212 816,173
May 4 5,117,500 1,167,918 23% -3,221,269 -63% 19,442,399 4,389,187
May 7 3,199,000 541,763 17% 3,074,388 96% 16,909,774 -2,532,625
May 8 3,547,800 918,807 26% -586,284 -17% 18,414,865 1,505,091
May 9 4,976,600 1,004,753 20% -3,269,355 -66% 22,688,973 4,274,108
May 10 7,308,700 1,345,497 18% 4,678,142 64% 19,356,328 -3,332,645
May 11 3,326,500 472,981 14% -3,170,471 -95% 22,999,780 3,643,452
May 14 2,613,200 321,965 12% 152,351 6% 23,169,394 169,614
May 15 4,342,800 548,825 13% 795,635 18% 22,922,584 -246,810
May 16 2,811,300 707,657 25% 889,164 32% 22,741,077 -181,507
May 17 2,632,300 732,943 28% 3,856,585 147% 19,617,435 -3,123,642
May 18 5,381,700 1,062,023 20% -3,646,152 -68% 24,325,610 4,708,175
May 21 6,035,500 973,946 16% -397,705 -7% 25,697,261 1,371,651
May 22 6,456,400 896,534 14% 2,877,662 45% 23,716,133 -1,981,128
May 23 8,138,700 995,125 12% -4,365,851 -54% 29,077,109 5,360,976
May 24 12,694,100 1,488,229 12% -279,785 -2% 30,845,123 1,768,014
May 25 3,895,700 617,339 16% 4,200,946 108% 27,261,516 -3,583,607
May 28 6,625,600 1,010,560 15% 864,616 13% 27,407,460 145,944
May 29 10,821,100 1,933,446 18% 1,043,516 10% 28,297,390 889,930
May 30 9,018,900 1,984,932 22% -2,656,592 -29% 32,938,914 4,641,524
May 31 7,414,900 1,492,427 20% 1,375,954 19% 33,055,387 116,473

Summary 121,492,100 21,982,566 18% 6,003,822 Added 15,978,744

The extent of shading is an indication of the amount of off-market adjustments to short positions taking
place. The 21.98 million shares representing short sales have translated to open short positions increasing
by 15.98 million shares.
Of the 23 trading days during May there were 14 days where an assumption of off-market activity is
necessary in order to reconcile the trading data. It means that 61% of the trading has been impacted by
substantial involvement off-market activity in the management of short positions.
The data also draws attention to the likelihood that the markets price discovery function has been
seriously compromised during May. The downward pressure to the share price through extensive short
selling appears to have been compounded by short positions being managed substantially off-market.

18

7.2.1.6 SECURITIES LENDING DATA THROUGH MAY 2012
The logical premise used to assess data is that a large change in open short positions ought to be reflected
by corresponding large changes in Net Borrowings and in Net Loans. For example a large increase in ASIC
open short position data should show up as an increase in Net Borrowings and a corresponding increase in
Net Lending.
Net Borrowing & Net Lending data in the table below that does not reasonably correspond to large
changes to Open Short Position movements has been highlighted using green shading.
Large changes in Net Borrowings and/or Net Lending that are not reflected in Open Short position changes
are shown highlighted as well.

2012
Changes to
Open Positions
Gross
Borrowings
Change
Net
Borrowings
Change to Net
Borrowings
Gross
Lending
Change
Net
Lending
Change to
Net Loans
May-01 98,931 11,577,607 170,147 7,488,056 -537 15,628,376 -1,128,909 11,538,825 -1,299,593
May-02 -2,938,535 12,151,731 574,124 8,062,181 574,125 16,093,655 465,279 12,004,105 465,280
May-03 816,173 11,237,830 -913,901 7,480,517 -581,664 15,911,418 -182,237 12,154,105 150,000
May-04 4,389,187 11,191,706 -46,124 7,503,858 23,341 15,993,668 82,250 12,305,820 151,715
May-07 -2,532,625 11,121,721 -69,985 7,408,102 -95,756 15,991,917 -1,751 12,278,298 -27,522
May-08 1,505,091 12,227,868 1,106,147 8,473,333 1,065,231 17,168,589 1,176,672 13,414,054 1,135,756
May-09 4,274,108 12,238,333 10,465 8,483,798 10,465 17,138,406 -30,183 13,383,871 -30,183
May-10 -3,332,645 12,778,339 540,006 8,810,489 326,691 17,661,438 523,032 13,693,588 309,717
May-11 3,643,452 14,387,355 1,609,016 10,517,489 1,707,000 18,165,679 504,241 14,295,813 602,225
May-14 169,614 18,498,567 4,111,212 11,405,695 888,206 19,411,435 1,245,756 12,318,563 -1,977,250
May-15 -246,810 17,870,532 -628,035 11,074,312 -331,383 18,933,206 -478,229 12,136,986 -181,577
May-16 -181,507 17,722,655 -147,877 10,870,902 -203,410 18,777,752 -155,454 11,925,999 -210,987
May-17 -3,123,642 18,055,883 333,228 11,172,258 301,356 19,504,624 726,872 12,620,999 695,000
May-18 4,708,175 18,065,381 9,498 11,187,498 15,240 19,604,239 99,615 12,726,356 105,357
May-21 1,371,651 17,158,389 -906,992 10,326,498 -861,000 19,602,404 -1,835 12,770,513 44,157
May-22 -1,981,128 17,568,074 3,180,719 10,732,771 215,282 18,734,418 -867,986 11,899,115 -871,398
May-23 5,360,976 17,225,691 -342,383 10,368,194 -364,577 17,787,592 -946,826 10,930,095 -969,020
May-24 1,768,014 18,743,926 1,518,235 11,846,112 1,477,918 18,216,434 428,842 11,318,620 388,525
May-25 -3,583,607 18,789,007 45,081 11,868,877 22,765 19,213,750 997,316 12,293,620 975,000
May-28 145,944 14,927,121 -3,861,886 7,995,877 -3,873,000 19,178,551 -35,199 12,247,307 -46,313
May-29 889,930 14,564,326 -362,795 7,532,050 -463,827 15,179,161 -3,999,390 8,146,885 -4,100,422
May-30 4,641,524 15,279,257 714,931 7,830,805 298,755 15,649,864 470,703 8,201,412 54,527
May-31 116,473 15,774,324 495,067 8,415,300 584,495 23,108,430 7,458,566 15,749,406 7,547,994

ASIC DATA ASX DATA ASX DATA
COLLATERAL BORROWINGS

OFF ON OFF ON
May 1 427 319

May 2 10,384,674 10,759,138 - -
May 3 209,160 298,492 0 1,100,000
May 4 151,885 151,885 - -
May 7 10,995,857 10,995,857 - -
May 8 151,885 151,885 - -
May 9 10,995,857 10,995,857 - -
May 10 151,885 151,885 - -
May 11 21,804,582 21,944,718 - -
May 14 151,885 - - -
May 15 10,972,359 10,972,359 5,000 5,000
May 17 11,124,244 10,972,359 - -
May 18 5,671,637 5,764,856 - -
May 21 2,614,002 151,885 1,100,000 0
May 22 151,895 521,187
May 23 5763,243 5,763,245

2,000,000
May 24 5,763,243 - - -
May 25 - - - -
May 28 3,862,526 100000 2,900,000 -
May 29 18 7,464,388 700,000
May 30 1 298,638 1,300,000

SECURITIES LENDING ANOMALIES: Re UBS Dealings in May
The movements of shares associated with securities
lending activity undertaken by UBS entities doesnt
appear to be reflected in official lending data. UBS
securities lending movements through May are
summarized in the table opposite.

Specific examples include returns of borrowed shares
on May 21 & May 28, and the borrowing of shares on
May 3, May 23 & May 30 none of which appear to be
adequately reflected by official data.

Also, the dealings associated with shares provided as
collateral dont appear to be captured by official
reporting of securities lending.
19

The extent of shading in the previous table draws attention to a system where large scale anomalies with
trading data and securities lending data appear to be the norm rather than the exception. The situation may
be indicating that trading abuses are widespread and that without the forensic auditing of accounts it is
simply not possible to provide credible reassurances that trading has been fair and reasonable. It is of note
that the ASX queried the company in relation to trading irregularities on May 23 involving a 10.9% drop in the
share price, but ignored a 46% drop in the share price from May 1 to May 23. Also ignored were the falls prior
to May where the share price fell 27% between Jan 19 and April 5. While the company was unable to clarify
matters from an operational perspective persistent anomalies associated with short selling and securities
lending data remain unaddressed. The anomalies may in fact be pointing to share price manipulation as the
reason for price declines. Certainly, left unexplained they cast a giant shadow over the integrity of the market.

7.2.1.7 SHARE PRICE TREND CORRESPONDING TO UBS SUBSTANTIAL SHARE HOLDER STATEMENTS
PERIOD JAN 18, 2012 TO July 24, 2012

$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
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4 Months prior
Last UBS notice
posted on July 17
May 16,
Substantial
Holder Notice
Open shorts increased by 230%
over the period January to July
Between the January highs and the
May lows the share price slumped
68% during 2012

SHARE PRICE
OPEN SHORT POSITIONS
A further 22% fall
A 46% fall from Jan
18 to May 16

20

7.2.1.8 BROKER TRADING DATA
Broker trading statistics for the period covered by UBS substantial shareholder notices are summarized
below. The data spans the period Jan 19 to July 12. UBS comes under notice because of disclosures in
relation to major shareholder status where securities lending, not buying and selling, was the major
activity of UBS affiliates. UBS, the broker, actually net sold 14.3 million shares over the period but the
question is for whom? Similarly, the net buying of Commonwealth Securities (18.3 million shares) and
Goldman Sachs, and the net selling by Morgan Stanley, Citigroup and Deutsche Bank all appear to have
escaped scrutiny from a regulatory perspective. The situation resembles trading in CDU with a pass-the-
parcel approach between major entities with no major changes to the register. Also, a good deal of
institutional activity looks to have occurred under the camouflage offered by retail brokers all while share
prices have been unable to reflect company fundamentals.
BROKER ACTIVITY FROM JAN 19, 2012 TO JULY 12, 2012 NET BUYERS
Broker Sells Buys Net % Share

CODE Sells Buys Net Buys % Net Buys
COMM 54,195,877 72,485,612 18,289,735 14.6% COMM 54,195,877 72,485,612 18,289,735 29.4%
CITI 66,045,380 49,885,079 -16,160,301 13.4%

GS 16,024,652 25,646,596 9,621,944 15.5%
UBS 42,397,142 28,121,730 -14,275,412 8.1%

AIEX 14,346,152 22,212,768 7,866,616 12.7%
CSUI 30,617,003 33,921,014 3,304,011 7.4%

ETRD 17,176,607 24,975,613 7,799,006 12.5%
DMG 33,138,612 29,623,992 -3,514,620 7.2%

CSUI 30,617,003 33,921,014 3,304,011 5.3%
MACQ 26,008,238 26,766,891 758,653 6.1%

CMCS 2,766,310 4,786,867 2,020,557 3.3%
MSDW 34,161,463 13,079,531 -21,081,932 5.4%

INST 11,724,925 13,363,066 1,638,141 2.6%
ETRD 17,176,607 24,975,613 7,799,006 4.9%

PSL 1,122,460 2,730,684 1,608,224 2.6%
GS 16,024,652 25,646,596 9,621,944 4.8%

ORDS 3,634,630 5,079,136 1,444,506 2.3%
AIEX 14,346,152 22,212,768 7,866,616 4.2%

RBSM 1,822,248 3,221,227 1,398,979 2.3%
BBY 13,409,274 12,913,105 -496,169 3.0%

ITG 619,922 1,663,499 1,043,577 1.7%
INST 11,724,925 13,363,066 1,638,141 2.9%

MACP 4,724,895 5,706,479 981,584 1.6%
SOSL 11,029,463 11,430,728 401,265 2.6%

TPPM 6,403,010 7,309,405 906,395 1.5%
SUSQ 8,237,948 8,233,626 -4,322 1.9%

MACQ 26,008,238 26,766,891 758,653 1.2%
TPPM 6,403,010 7,309,405 906,395 1.6%

TIMBA 949,384 1,481,689 532,305 0.9%
VIRT 6,612,291 5,829,053 -783,238 1.4%

AUST 109,087 597,600 488,513 0.8%
MACP 4,724,895 5,706,479 981,584 1.2%

SBAR 528,693 973,928 445,235 0.7%
ORDS 3,634,630 5,079,136 1,444,506 1.0%

SOSL 11,029,463 11,430,728 401,265 0.6%
PERS 3,959,087 4,306,314 347,227 1.0%

SHAW 186,208 577,500 391,292 0.6%
MERL 4,949,189 3,176,688 -1,772,501 0.9%

PERS 3,959,087 4,306,314 347,227 0.6%
CMCS 2,766,310 4,786,867 2,020,557 0.9%

BELL 2,431,191 2,658,985 227,794 0.4%
BELL 2,431,191 2,658,985 227,794 0.6%

Other 3,409,465 4,062,017 652,552 1.0%
RBSM 1,822,248 3,221,227 1,398,979 0.6%

62,168,111

PSL 1,122,460 2,730,684 1,608,224 0.4%

JPM 2,090,647 1,663,115 -427,532 0.4% NET SELLERS
PCAP 1,809,930 1,095,240 -714,690 0.3%

Broker Sells Buys Net Sells % Net Sells
TIMBA 949,384 1,481,689 532,305 0.3% MSDW 34,161,463 13,079,531 -21,081,932 33.9%
CLSA 1,725,368 678,247 -1,047,121 0.3% CITI 66,045,380 49,885,079 -16,160,301 26.0%
ITG 619,922 1,663,499 1,043,577 0.3%

UBS 42,397,142 28,121,730 -14,275,412 23.0%
EVAN 1,179,650 1,030,542 -149,108 0.3%

DMG 33,138,612 29,623,992 -3,514,620 5.7%
BTIG 1,539,400 500,000 -1,039,400 0.2%

MERL 4,949,189 3,176,688 -1,772,501 2.9%
WILS 727,868 921,482 193,614 0.2%

CLSA 1,725,368 678,247 -1,047,121 1.7%
SBAR 528,693 973,928 445,235 0.2%

BTIG 1,539,400 500,000 -1,039,400 1.7%
CAM 782,327 707,627 -74,700 0.2%

VIRT 6,612,291 5,829,053 -783,238 1.3%
ABNA 710,513 714,280 3,767 0.2%

PCAP 1,809,930 1,095,240 -714,690 1.2%
CIMB 678,363 684,245 5,882 0.2%

BBY 13,409,274 12,913,105 -496,169 0.8%
HART 714,600 594,100 -120,500 0.2%

JPM 2,090,647 1,663,115 -427,532 0.7%
NOM 798,479 449,258 -349,221 0.1%

NOM 798,479 449,258 -349,221 0.6%
HUB24 535,600 618,900 83,300 0.1%

MACQ 1,179,650 1,030,542 -149,108 0.2%
GETCO 474,761 433,625 -41,136 0.1%

HART 714,600 594,100 -120,500 0.3%
SHAW 186,208 577,500 391,292 0.1%

EVAN 782,327 707,627 -74,700 0.1%
Other 969,291 1,219,072 249,781 0.3%

Other 8,924,879 8,763,213 -161,666 0.3%
Totals 434,068,138 434,068,138 0 100%

-62,168,111

Of major concern is that the trading of leading entities goes largely unnoticed and unreported if it occurs under the 5%
substantial shareholder reporting threshold. Patterns of trading churn between major brokers nevertheless suggests
collusion and requires proper investigation, particularly given that institutions generally deal off-market when they
genuinely have large orders to fill or large orders to dispose of. Any dominance over the market by entities engaging in
zero sum game trading activity and with no substantial changes to the register may be pointing to manipulative trading.
21

7.2.1.8.1 BROKER TRADING IN THE PERIOD RELATING TO THE ASX PRICE QUERY: May 22 & May 23, 2012
ASX Price Query: We have noted a decrease in the price of the Companys securities from a close of
$0.685 on 22 May 2012 to an intraday low of $0.61 today, at the time of writing (i.e. May 23). In light of
the price change, is the Company aware of any information concerning it that has not been announced
which, if known, could be an explanation for recent trading in the securities of the Company?

While the company was at a loss to explain the share price movements and made the point that it
considered the share price grossly undervalued, the trading data suggests that there is a very good chance
that the heavy net selling by brokers UBS and Credit Suisse was largely responsible for downward pressure
on the share price. Also, corresponding to the heavy net selling by CSUI & UBS was substantial accumulation
by brokers Commonwealth Securities, Goldman Sachs, Etrade and Australian Investment Exchange. The
trading again takes on the appearance of a pass-the-parcel exercise with the activity of the retail brokers
most likely camouflaging the large scale buying of institutional clients, not retail investors.

BROKER ACTIVITY MAY 22 AND MAY 23, 2012 NET BUYERS
Broker Sells Buys Net
% of ALL
Trades
CODE Sells Buys Net Buys
% Net Buys
COMM 1,374,127 3,619,910 2,245,783 17.11% COMM 1374127 3619910 2,245,783 34.6%
CSUI 3,535,310 721,106 -2,814,204 14.58% GS 440610 1661638 1,221,028 18.8%
UBS 3,342,859 414,155 -2,928,704 12.87% ETRD 329942 1210371 880,429 13.6%
GS 440,610 1,661,638 1,221,028 7.20% AIEX 344817 971500 626,683 9.6%
CITI 797,558 928,140 130,582 5.91% ORDS 0 222000 222,000 3.4%
ETRD 329,942 1,210,371 880,429 5.28% BELL 5000 215000 210,000 3.2%
DMG 707,111 776,856 69,745 5.08% CMCS 20300 185255 164,955 2.5%
AIEX 344,817 971,500 626,683 4.51% CITI 797558 928140 130,582 2.0%
BBY 581,843 579,596 -2,247 3.98% TPPM 65000 186311 121,311 1.9%
MACQ 583,166 516,458 -66,708 3.77% PCAP 0 116550 116,550 1.8%
MSDW 711,194 193,873 -517,321 3.10% RBSM 40000 151849 111,849 1.7%
INST 417,663 416,206 -1,457 2.86% ITG 0 70826 70,826 1.1%
SUSQ 388,152 256,874 -131,278 2.21% DMG 707111 776856 69,745 1.1%
SOSL 207,238 222,238 15,000 1.47% MERL 23829 83621 59,792 0.9%
TPPM 65,000 186,311 121,311 0.86% BRL 2667 54667 52,000 0.8%
MACP 107,100 156,858 49,758 0.90% MACP 107100 156858 49,758 0.8%
PERS 100,000 125,000 25,000 0.77% PSL 95000 125000 30,000 0.5%
CIMB 115,000 115,000 0 0.79% PERS 100000 125000 25,000 0.4%
ORDS 0 222,000 222,000 0.76% TIMB 83500 107935 24,435 0.4%
PSL 95,000 125,000 30,000 0.75% SOSL 207238 222238 15,000 0.2%
VIRT 104,285 110,664 6,379 0.74% Other 244,675 293,333 48,658 0.7%
BELL 5,000 215,000 210,000 0.75% 6,496,384
RBSM 40,000 151,849 111,849 0.66%

CMCS 20,300 185,255 164,955 0.70%

TIMB 83,500 107,935 24,435 0.66%

NET SELLERS
PCAP 0 116,550 116,550 0.40% Broker Sells Buys Net Sells % Net Sells
MERL 23,829 83,621 59,792 0.37% UBS 3342859 414155 -2,928,704 45.1%
ITG 0 70,826 70,826 0.24% CSUI 3535310 721106 -2,814,204 43.3%
BRL 2,667 54,667 52,000 0.20% MSDW 711194 193873 -517,321 8.0%
MORR 15,000 16,500 1,500 0.11% SUSQ 388152 256874 -131,278 2.0%
GETCO 7,590 21,069 13,479 0.10% MACQ 583166 516458 -66,708 1.0%
NOM 25,700 0 -25,700 0.09% NOM 25700 0 -25,700 0.4%
JPM 14,135 12,100 -2,035 0.09% FWT 5350 0 -5,350 0.1%
SBAR 2,800 16,100 13,300 0.06% BBY 581843 579596 -2,247 0.03%
SHAW 0 7,000 7,000 0.02% JPM 14135 12100 -2,035 0.03%
FWT 5,350 0 -5,350 0.02% INST 417663 416206 -1,457 0.02%
WILS 0 5,000 5,000 0.02% OPT 1380 0 -1,380 0.02%
HUB24 0 2,000 2,000 0.01%

-6,496,384

OPT 1,380 0 -1,380 0.00%

Totals 14,595,226 14,595,226 0 100%

Shareprice behaviours are seen to be the result of questionable trading activity and not a reflection of
company fundamentals. As such, it would appear that the official auditing of trading records would be
required in order to establish the reasons for the aberrant price trends noticed by market supervisors.

22

7.2.1.8.2 DISCLOSED TRADING BY UBS AFFILIATES ON MAY 22, 2012
Although UBS sold heavily through the two days it wasnt on behalf of its own afflliates as revealed in the
substantial holder notice. Most of the the transactions for May 22 are shown below.

Off Market
Buys?
23

7.2.1.8.3 TRADING BY UBS AFFILIATES ON MAY 23, 2012
The trading by UBS affiliates on May 23 consisted of only a few buying and selling transactions however
substantial volumes of shares were transferred in off-market dealings.

7.2.1.8.4 TRADING SUMMARY BY UBS AFFILIATES ON MAY 22 and MAY 23, 2012
The transaction summary for UBS affiliates on May 22 and May 23 is as follows.
Buying & Selling Collateral Movements Borrowed Stock

SELLS BUYS NET OFF ON NET OFF ON
NET
May 22
72,522 1,591,873
1,519,351
151885 521187
369,302
- -
0
May 23
256,575 1,611,600
1,355,025
5763243 5763243
0
- 2,000,000
2,000,000
Totals
329,097 3,203,473 2,874,376 5,915,128 6,284,430 369,302 - 2,000,000 2,000,000

Buying and selling data reveals net purchases of 2,874,376 shares however the transaction lists suggest
that 1.5 million buys on May 22 and another 1.5 million buys on May 23 (shown circled in the previous
tables) are off-market transactions. Curiously, no consideration was associated with the purchase of 3
million shares.
Ignoring the off-market acquisition of 3 million shares, the on-market trading of UBS affiliates nets out as
follows:
Sells Buys Net
329,097 203,473 -125,624

By contrast, IRESS broker data for UBS for the two days shows heavy net selling in the market; selling that
hasnt shown up in the accounts of UBS affiliates. Presumably the selling was on behalf of other UBS clients.
Broker Activity Sells Buys Net
May-22 1,492,556 239,084 -1,253,472
May-23 1,850,303 175,071 -1,675,232

3,342,859 414,155 -2,928,704

Collateral share flows
of 5.24 million shares
on May 23
Borrowings of 2
million shares
Off Market
Buys?
The data presents a disturbing and somewhat confusing picture regarding trading. The broker (UBS) has net
sold almost 3 million shares for unknown interests (not its affiliates) while UBS affiliates have acquired 3
million shares behind the scenes (i.e.; through off-market activity) with a further 2 million shares borrowed as
well. The situation requires clarification. So too does a large collateral share movement on May 23. Large
back and forth movements on single days happen to be a regular feature of the activities of UBS affiliates yet
the transactions have passed regulatory scrutiny despite a share price query to the company concerning the
same period of trading. Anomalies in trading data appear to suggest that off-market dealings were
responsible for distortions to the market and have impacted market integrity during that time.
24

7.2.1.8.5 TRADING SUMMARY BY UBS AFFILIATES COVERING ALL SUBSTANTIAL HOLDER NOTICES:
The disclosures by UBS as a substantial shareholder serve as an interesting case study to further
demonstrate why audits are necessary in order to properly assess trading taking place. A comparison of
broker buying and selling and actual shareholder changes by UBS affiliates is provided below.
The notices issued by UBS during 2012 are referred to as follows
NOTICE 1: (announced on June 16) Trading Period: Jan 19, 2012 to May 16, 2012 and then May 17
NOTICE 2: (announced on June 16) Trading Period: Jan 18, 2012 and then to May 30, 2012
NOTICE 3: (announced on July 13) Trading Period: May 31 to July 10, 2012
NOTICE 4: (announced on July 16) Trading Period: July 11 only
NOTICE 5: (announced on July 17) Trading Period: July 12 only

The table compares shareholder changes by UBS affiliates to the buying & selling undertaken by broker
UBS in the market.
2012 Substantial Notices
by UBS
Activity of UBS Affiliates

Broker Buying & Selling
Sells Buys Net

Sells Buys Net
Notice 1: Jan 19 -May 16 29,311,901 32,603,895 3,291,994

21,756,338 17,695,412 -4,060,926
Notice 1: May-17 343,954 315,373 -28,581

268,786 146,363 -122,423
Notice 2: May-18 1,975,010 3,169,540 1,194,530

1,976,197 123,846 -1,852,351
Notice 2: May 19-May 30 2,247,319 7,758,207 5,510,888

9,115,801 2,443,204 -6,672,597
Notice 2: May 31-Jul 10 5,709,708 3,093,674 -2,616,034

8,785,075 7,219,501 -1,565,574
Notice 4: Jul-11 418,927 310,296 -108,631

322,221 351,370 29,149
J Notice 5: jul-12 324,453 27,415 -297,038

172,724 142,034 -30,690
Totals 40,331,272 47,278,400 6,947,128

42,397,142 28,121,730 -14,275,412

The outstanding feature of UBS dealings has been broker net selling across nearly all trading periods. The
net selling amounted to 14.275 million shares. Yet at the same time as substantial net selling has occurred
through broker operations, UBS affiliates have recorded net purchases of 6.947 million purchases.
In the period Jan 19 to May 16 UBS affiliates sold around 7.56 million shares more than what their broker
put through the market but managed to accumulated 3.29 million shares. Their buying looks to have been
done through other brokers however the situation raises crucial market integrity issues, particularly in view
of the share price slump that occurred during the period.
A similar situation occurred in the period May 19 to May 30 where heavy net selling by the broker again
coincided with substantial net accumulation by UBS affiliates. The selling of shares by the UBS broking arm
while UBS affiliates were building their holdings again raises concerns about the state of the market during
a volatile period where the company was presented with a please explain from the ASX.
The market data suggests that the companys reference to an undervalued share price looks to be more
the result of market forces brought about by broker activity rather than company specific issues. UBS
becoming a major shareholder mainly through securities lending activity in itself would suggest that lower
prices were an expectation of the corporate positioning that has occurred. While profiting from short
selling can be a legitimate trading strategy any dislocation to share prices brought about by unfair dealings
needs to be thoroughly assessed, particularly where accumulation of shares appears to be a primary
motivation for the lowering of sharing prices.
UBS disclosures are likely to be signalling what is occurring right across the ASX where extensive securities
lending, large volumes of back and forth trading churn and the likely co-operation or collusion between
brokers are common themes. Unfortunately any unfair trading that doesnt trigger the 5% substantial
shareholder reporting threshold effectively takes place unnoticed and is largely unaddressed by regulators.
25

7.2.1.9 TRADING DATA ASSOCIATED WITH THE COVERING OF SHORTS: Nov 1, 2011 to Jan 22, 2013
The graph shows daily open short positions as published on the ASIC website where two significant trends
have been highlighted which are denoted as Period 1 and Period 2. The data associated with the trends is
provided below.

7.2.1.9.1 PERIOD 1: Aug 29 to Oct 29 2012
The table estimates short covers based on official data by assuming that short selling and short covering is
done on market. Where estimates provide unrealistic results, entries have been shaded. Anomalous or
unrealistic results are assumed to be due to off-market adjustments to short positions. Negative estimates
have been yellow and short covering estimates that exceed daily buying or represent an unreasonable
portion of daily buying are shared pink. The extent of shading is therefore an indicator of the extent of off-
market involvement in managing short positions.
Period 1
2012
Total ASX
Sales
ASX Short
Sales
Shorts %
ASIC Open
Positions
Change to Open
Short Positions

Estimated
Short Covers
Covers as a % of
ASX Volumes
Aug 29 2,560,500 1,041,409 40.67% 45,507,764 1,327,113 -285,704 -11.2%
Aug 30 3,024,100 1,209,603 40.00% 44,881,235 -626,529 1,836,132 60.7%
Aug 31 3,666,500 771,072 21.03% 44,757,051 -124,184 895,256 24.4%
Sep 3 2,289,400 443,434 19.37% 44,775,918 18,867 424,567 18.5%
Sep 4 1,320,300 556,894 42.18% 45,070,275 294,357 262,537 19.9%
Sep 5 1,722,500 781,055 45.34% 45,332,831 262,556 518,499 30.1%
Sep 6 3,659,200 517,157 14.13% 44,329,544 -1,003,287 1,520,444 41.6%
Sep 7 3,184,200 396,313 12.45% 43,610,059 -719,485 1,115,798 35.0%
Sep 10 4,138,600 902,114 21.80% 43,479,199 -130,860 1,032,974 25.0%
Sep 11 2,041,600 373,644 18.30% 42,850,113 -629,086 1,002,730 49.1%
Sep 12 2,316,200 285,182 12.31% 42,387,708 -462,405 747,587 32.3%
Sep 13 701,100 132,493 18.90% 41,899,370 -488,338 620,831 88.6%
Sep 14 1,510,000 207,091 13.71% 41,758,964 -140,406 347,497 23.0%
Sep 17 1,558,600 476,081 30.55% 41,617,529 -141,435 617,516 39.6%
Sep 18 7,539,100 655,330 8.69% 41,555,023 -62,506 717,836 9.5%
Sep 19 9,596,000 1,475,463 15.38% 40,674,242 -880,781 2,356,244 24.6%
Sep 20 4,160,700 646,488 15.54% 39,920,641 -753,601 1,400,089 33.7%
Sep 21 4,327,300 333,734 7.71% 38,188,960 -1,731,681 2,065,415 47.7%
Sep 24 4,763,800 239,532 5.03% 35,112,248 -3,076,712 3,316,244 69.6%
Sep 25 3,694,200 587,239 15.90% 34,052,052 -1,060,196 1,647,435 44.6%
Sep 26 2,725,700 613,937 22.52% 34,075,591 23,539 590,398 21.7%
Sep 27 2,243,800 253,231 11.29% 40,077,069 6,001,478 -5,748,247 -256.2%
Sep 28 2,530,300 525,184 20.76% 34,113,315 -5,963,754 6,488,938 256.4%
Oct 1 2,584,600 394,039 15.25% 32,851,904 -1,261,411 1,655,450 64.1%
0
5
10
15
20
25
30
35
40
45
50
M
i
l
l
i
o
n
s
Period 1
Period 2
26

Period 1
2012
Total ASX
Sales
ASX Short
Sales
Shorts %
ASIC Open
Positions
Change to Open
Short Positions

Estimated
Short Covers
Covers as a % of
ASX Volumes
Oct 2 6,862,800 672,708 9.80% 28,760,288 -4,091,616 4,764,324 69.4%
Oct 3 6,052,500 846,979 13.99% 25,248,867 -3,511,421 4,358,400 72.0%
Oct 4 5,887,200 791,225 13.44% 21,896,537 -3,352,330 4,143,555 70.4%
Oct 5 4,825,200 677,925 14.05% 18,722,736 -3,173,801 3,851,726 79.8%
Oct 8 3,234,200 565,614 17.49% 16,563,676 -2,159,060 2,724,674 84.2%
Oct 9 3,449,700 532,818 15.45% 20,260,301 3,696,625 -3,163,807 -91.7%
Oct 10 1,736,800 523,551 30.14% 20,572,193 311,892 211,659 12.2%
Oct 11 2,486,800 959,381 38.58% 10,061,765 -10,510,428 11,469,809 461.2%
Oct 12 1,612,500 297,652 18.46% 12,837,264 2,775,499 -2,477,847 -153.7%
Oct 15 6,077,400 1,105,404 18.19% 4,681,820 -8,155,444 9,260,848 152.4%
Oct 16 3,490,300 1,229,629 35.23% 5,012,985 331,165 898,464 25.7%
Oct 17 2,196,500 1,122,046 51.08% 12,624,932 7,611,947 -6,489,901 -295.5%
Oct 18 2,206,900 415,487 18.83% 12,634,580 9,648 405,839 18.4%
Oct 19 1,476,500 411,302 27.86% 14,166,969 1,532,389 -1,121,087 -75.9%
Oct 22 2,918,800 288,388 9.88% 14,252,205 85,236 203,152 7.0%
Oct 23 2,717,600 1,392,715 51.25% 15,196,345 944,140 448,575 16.5%
Oct 24 5,784,800 503,225 8.70% 16,807,620 1,611,275 -1,108,050 -19.2%
Oct 25 3,947,400 2,046,425 51.84% 18,329,360 1,521,740 524,685 13.3%
Oct 26 6,948,100 2,882,293 41.48% 14,175,849 -4,153,511 7,035,804 101.3%
Oct 29 3,688,700 601,877 16.32% 13,841,372 -334,477 936,354 25.4%

7.2.1.9.1.2 SHORT COVERING VERSUS THE SHARE PRICE: PERIOD 1

The major reduction in short positions is seen to be more likely the result of off-market activity than genuine
buying on-market. As such the share price is impacted by short selling on-market which adds downward
pressure to prices, while the covering of positions is organised off-market, thereby avoiding the process of
price discovery. The situation is likely to result in a grossly unfair market for all other participants.

Approx 40 million open
shorts have been covered
The share price was
restricted to a band of 15
cents as shorts were covered
SHORTS
S

Also of concern are the high levels of co-operation that appear to be taking place between the parties
involved with securities lending transactions; co-operation that may amount to share price manipulation at
the expense of clients whose shares are under management and are made available for questionable stock
lending practices.

27

7.2.1.9.2 PERIOD 2: Jan 2 to Jan 21, 2013
Although there has been substantial share price rises during early 2013 on the back of speculation about
the companys shale oil interests, the short covering that has taken place looks to have mostly occurred
off-market. The anomalous data trends in the table below (as per the shaded data) clearly indicate where
off-market adjustments have been the main driver of major changes to open short positions and not on-
market purchases.
Period 2
2013
Total ASX
Sales
ASX Short
Sales
Shorts %
ASIC Open
Positions
Change to Open
Short Positions

Estimated
Short Covers
Covers as a % of
ASX Volumes
Dec 13 19,008,900 2,149,900 11.3% 30,042,379 -1,947,100 4,097,000 21.6%
Dec 14 11,212,600 1,000,827 8.9% 32,442,157 2,399,778 -1,398,951 -12.5%
Dec 17 3,348,900 517,116 15.4% 30,626,417 -1,815,740 2,332,856 69.7%
Dec 18 6,981,100 1,134,485 16.3% 30,646,751 20,334 1,114,151 16.0%
Dec 19 4,346,700 641,677 14.8% 30,656,998 10,247 631,430 14.5%
Dec 20 6,419,100 1,259,218 19.6% 33,637,830 2,980,832 -1,721,614 -26.8%
Dec 21 25,449,400 1,549,846 6.1% 22,810,529 -10,827,301 12,377,147 48.6%
Dec 24 2,152,900 246,173 11.4% 22,455,364 -355,165 601,338 27.9%
Dec 27 1,299,000 211,590 16.3% 28,710,365 6,255,001 -6,043,411 -465.2%
Dec 28 2,222,200 374,640 16.9% 27,017,501 -1,692,864 2,067,504 93.0%
Dec 31 1,424,900 225,513 15.8% 27,629,260 611,759 -386,246 -27.1%
Jan 2 2,541,800 365,742 14.4% 26,028,308 -1,600,952 1,966,694 77.4%
Jan 3 2,713,500 748,374 27.6% 26,868,140 839,832 -91,458 -3.4%
Jan 4 1,419,800 661,820 46.6% 27,109,492 241,352 420,468 29.6%
Jan 7 1,905,000 403,491 21.2% 26,965,999 -143,493 546,984 28.7%
Jan 8 8,104,500 802,734 9.9% 29,740,067 2,774,068 -1,971,334 -24.3%
Jan 9 8,231,100 1,231,103 15.0% 28,552,716 -1,187,351 2,418,454 29.4%
Jan 10 11,689,800 1,356,644 11.6% 28,945,698 392,982 963,662 8.2%
Jan 11 13,366,200 1,910,724 14.3% 27,907,592 -1,038,106 2,948,830 22.1%
Jan 14 8,433,900 1,303,179 15.5% 23,457,239 -4,450,353 5,753,532 68.2%
Jan 15 7,615,700 1,086,354 14.3% 25,602,335 2,145,096 -1,058,742 -13.9%
Jan 16 5,720,900 1,187,362 20.8% 18,250,301 -7,352,034 8,539,396 149.27%
Jan 17 2,684,300 408,631 15.2% 17,614,450 -635,851 1,044,482 38.91%
Jan 18 5,508,400 859,096 15.6% 16,078,477 -1,535,973 2,395,069 43.5%
Jan 21 1,964,300 414,776 21.1% 15,921,092 -157,385 572,161 29.1%

28

7.2.1.10 OPEN SHORTS COMPARED TO STOCK LENDING & STOCK BORROWING DATA: - Period 2
Shaded data again shows a lack of correlation between changes to Open Short Positions with Net
Borrowings and with Net Lending. In almost all cases of large fluctuations in open shorts there is limited
correspondence with securities lending data.
Logically, a large increase in open short positions ought to be reflected by a commensurate increase in
borrowings and a commensurate increase in lending. The same should occur with large reductions. As per
previous research, the lack of correlation suggests that off-market adjustments to short positions are being
made over and above that which is facilitated by stock lending. Such events would point to a strong degree
of co-operation or indeed collusion between institutional fund managers whereby exposed positions are
being managed in a way that avoids proper price discovery.
2012
2013
Changes to
Open Positions
Gross
Borrowings
Change
Net
Borrowings
Change to Net
Borrowings
Gross
Lending
Change
Net
Lending
Change to
Net Loans
Dec 13 -1,947,100 32,309,855 6,305 11,697,808 -1,107,161 53,372,299 5,477,457 32,760,252 4,363,991
Dec 14 2,399,778 33,188,117 878,262 10,599,627 -1,098,181 50,430,763 -2,941,536 27,842,273 -4,917,979
Dec 17 -1,815,740 32,624,162 -563,955 10,478,595 -121,032 48,978,840 -1,451,923 26,833,273 -1,009,000
Dec 18 20,334 32,545,909 -78,253 6,877,955 -3,600,640 54,331,035 5,352,195 28,663,081 1,829,808
Dec 19 10,247 32,735,267 189,358 10,302,568 3,424,613 48,334,550 -5,996,485 25,901,851 -2,761,230
Dec 20 2,980,832 36,686,884 3,951,617 16,773,269 6,470,701 45,815,466 -2,519,084 25,901,851 0
Dec 21 -10,827,301 38,081,194 1,394,310 17,917,248 1,143,979 47,051,846 1,236,380 26,887,900 986,049
Dec 24 -355,165 37,627,776 -453,418 17,700,758 -216,490 46,679,775 -372,071 26,752,757 -135,143
Dec 27 6,255,001 36,542,498 -1,085,278 18,226,716 525,958 44,207,824 -2,471,951 25,892,042 -860,715
Dec 28 -1,692,864 35,305,156 -1,237,342 17,792,324 -434,392 41,872,882 -2,334,942 24,360,050 -1,531,992
Dec 31 611,759 31,343,156 -3,962,000 14,147,352 -3,644,972 41,376,854 -496,028 24,181,050 -179,000
Jan 2 -1,600,952 30,906,701 -436,455 13,741,806 -405,546 38,798,943 -2,577,911 21,634,048 -2,547,002
Jan 3 839,832 31,001,837 95,136 13,399,295 -342,511 39,366,590 567,647 21,764,048 130,000
Jan 4 241,352 29,111,216 -1,890,621 11,409,295 -1,990,000 38,232,073 -1,134,517 20,530,152 -1,233,896
Jan 7 -143,493 29,197,391 86,175 11,479,150 69,855 38,040,328 -191,745 20,322,087 -208,065
Jan 8 2,774,068 28,345,614 -851,777 13,868,190 2,389,040 36,545,870 -1,494,458 22,068,446 1,746,359
Jan 9 -1,187,351 29,342,112 996,498 15,048,614 1,180,424 36,102,854 -443,016 21,809,356 -259,090
Jan 10 392,982 29,230,239 -111,873 15,353,168 304,554 35,765,427 -337,427 21,888,356 79,000
Jan 11 -1,038,106 29,095,255 -134,984 15,936,241 583,073 35,093,524 -671,903 21,934,510 46,154
Jan 14 -4,450,353 28,172,959 -922,296 15,449,099 -487,142 34,559,650 -533,874 21,835,790 -98,720
Jan 15 2,145,096 29,300,586 1,127,627 17,563,765 2,114,666 33,707,557 -852,093 21,970,736 134,946
Jan 16 -7,352,034 66,965,005 37,664,419 9,555,959 -8,007,806 107,523,025 73,815,46
8
50,113,979 28,143,243
Jan 17 -635,851 66,772,062 -192,943 8,941,861 -614,098 106,161,726 -1,361,299 48,331,525 -1,782,454
Jan 18 -1,535,973 65,969,481 -802,581 8,440,336 -501,525 104,929,668 -1,232,058 47,400,523 -931,002
Jan 21 -157,385 65,623,083 -346,398 8,530,005 89,669 102,599,334 -2,330,334 45,506,256 -1,894,267

Comparisons between lending and borrowing activity that has accompanied large fluctuations in open
short positions are made in the following table. The circled data for January 8 is one of the few occasions
where the data appears to reconcile. The remaining data shows a concerning lack of correspondence.
Official securities lending data not corresponding to significant market events such as substantial changes
to open short positions means that investors are not reliably informed. It also means that without
appropriate checks by regulators to uncover the reasons behind persistent data anomalies informed
judgements about the integrity of dealings are simply not possible.

29

7.2.1.10.1

7.2.1.11 SUBSTANTIAL SHAREHOLDER ANOMALY : Dec 24, 2012 to Jan 18, 2013
A substantial shareholder notice by Credit Suisse Holdings Australia disclosed the activities of Credit Suisse
affiliates throughout the period Jan 2 to Jan 21, 2013 previously referred to as Period 2. The notice actually
related to trading between Dec 24, 2013 and Jan 18, 2013.
Credit Suisse was a major buyer of shares increasing their stake in Linc Energy from 7.82% to 8.82%. Their
net buying amounted to 6.01 million shares.

A summary of their on-market buying and selling is as follows.

Sells Buys Net
Credit Suisse Affiliates 2,105,398 8,116,939 6,011,541

However according to IRESS trading data, the trading undertaken by broker Credit Suisse (CSUI) over the
same period as covered by the notice (i.e.; Dec 24, 2012 to Jan 18, 2013) varied significantly from the
buying and selling disclosed for Credit Suisse affiliates.
The buying and selling faciliated by broker Credit Suisse amounted to the following:

Sells Buys Net
CSUI Trading 1,447,235 3,733,519 2,286,284
The broker data shows a lack of selling compared to the disposal of shares by affiliates and a significant
shortfall in buying compared to the purchases made by Credit Suisse affiliates.
-14,000,000
-12,000,000
-10,000,000
-8,000,000
-6,000,000
-4,000,000
-2,000,000
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
20,000,000
22,000,000
24,000,000
26,000,000
28,000,000
30,000,000
2012
Dec 13
2012
Dec 14
2012
Dec 17
2012
Dec 20
2012
Dec 21
2012
Dec 27
2012
Dec 28
2013
Jan 2
2013
Jan 8
2013
Jan 9
2013
Jan 11
2013
Jan 14
2013
Jan 15
2013
Jan 16
2013
Jan 18
Change to Open Positions
Change to Net Borrowing
Change to Net Lending
Reasonable
correlation
Unexplained variances
are commonplace
CHART COMPARING OPEN SHORT POSITIONS DATA and SECURITIES LENDING DATA
30

The substantial variations in data suggest that Credit Suisse was assisted in the market by other brokers in
servicing the requirements of their affiliates. Additional activity by Credit Suisse affiliates amounted to sales
of 658,163 shares and additional purchases of 4.38 million shares.
The situation is further highlighted by considering days where large numbers of shares were transacted on
behalf of Credit Suisse affiliates. Two such days (Dec 28 & Jan 8) are summarized below.
Dec 28.2012 Sells Buys Net
Affiliates 690,897 269,346 -421,551
CSUI Broker Trades 29,235 141,435 112,200

Jan 8, 2013 Sells Buys Net
Affiliates 0 1,418,491 1,418,491
CSUI Broker Trades 2,074 412,713 410,639

Both days reveal substantial discrepancies and again point to other brokers assisting with the servicing of
Credit Suisse affiliates buying (Jan 28) and selling (Dec 28). A situation where brokers are trading to achieve
shared goals raises doubt about the fairness of the market, and such concerns are compounded by a system
where the majority of trading is mostly opaque to all market observers.
It is also of note that while Credit Suisse was associated with major shareholder activity it rated only 10
th
in
terms of overall market share.
Rank Broker Sells Buys Net Market Share
1 COMM 18,292,777 14,222,585 -4,070,192 18.9%
2 UBS 7,908,001 8,252,099 344,098 9.0%
3 MACQ 6,779,436 8,271,683 1,492,247 9.0%
4 SOSL 7,064,062 6,937,080 -126,982 8.1%
5 ETRD 6,985,200 5,218,294 -1,766,906 7.0%
6 MSDW 4,195,259 5,995,510 1,800,251 5.7%
7 CITI 7,344,734 2,490,882 -4,853,852 5.2%
8 SUSQ 3,191,226 2,976,140 -215,086 3.6%
9 AIEX 3,300,969 2,011,664 -1,289,305 3.1%
10 CSUI 1,447,235 3,733,519 2,286,284 3.0%

Given the Credit Suisse disclosures and over 4 million of purchases unable to be accounted for, the trading of
leading brokers can only be regarded with suspicion. If the high volumes of back and forth trading churn by
leading brokers was organised to mask and facilitate the strong accumulation taking place, then it is likely that
trading has been decidedly unfair. It is therefore important to establish the full circumstances associated with
all of the Credit Suisse acquisitions so that the situation can be properly clarified.

Broker sales
on Dec 28
are far below
sales by CSUI
affiliates
Broker buys
on Jan 8 are
far below the
purchases of
CSUI affiliates
Curiously, CSUI is associated
with significant levels of
accumulation with a 3.0%
market share while the 69.6% of
trading by other leading brokers
had no reported impact on the
register.
The contradictions between UBS broker selling while UBS affiliates accumulated shares (Refer Section 7.2.1.8.5) and the
accumulation by Credit Suisse affiliates through other brokers quite separate to the activity of their house broker CSUI
represent worrisome trends. The situations have seemingly passed regulatory scrutiny however questions remain that
cannot be resolved without proper audits. Similar situations could also be occurring in day to day trading across a large
number of stocks and also going undetected; particularly when share flows are kept below substantial shareholder
compulsory reporting guidelines. The lack of transparency associated with day to day trading and a reluctance to audit
accounts where anomalous trading activity is clearly evident means that unfair trading practices are likely to be
widespread and passing under the radar of current market surveillance systems. The situation reflected by trading data
represents a strong contradiction to official claims that the market is fair and transparent and functions with integrity.

31

7.2.1.12 SUMMARY OF TRADING: Concerning Trends
The following charts track the relationship between share price performance and levels of short selling
from the beginning of June 2011 up until March 13, 2013.
The following features of trading that are closely linked to securities lending data anomalies may be
flagging significant share price manipulation and insider trading concerns:
Although the share price fell by 41% between June 1 and Nov 21, 2011 without a noticeable change
in open short positions, additional falls to $0.64 by Aug 24, 2012 (a further 65% reduction) was
accompanied by an almost 6 fold increase in open short positions (i.e.; a 583% increase).
Short covering purchases associated with a large unwinding of short positions (i.e.; an 89% reduction)
between Aug 24 & Oct 15, 2012 had only a minor impact on the share price which fell by 4%.
The large reduction in short positions occurred immediately before a major trend reversal.
Short positions were again applied as the share price increased, however with continuing share
price appreciation the entities forcing open short increases capitulated. The subsequent reduction
in short positions was achieved through off-market dealings which again side-stepped the price
discovery function of the market.

Nov 21, 2011
Aug 24, 2012
Oct 15, 2012
Dec 5, 2012
KEY DATES Price Change Shorts Change
Jun 1, 2011 $3.14 Reference 6,318,236
Nov 21 2011 $1.84 -41% 6,465,249 2%
Aug 24, 2012 $0.64 -65% 44,147,606 583%
Oct 15, 2012 $0.61 -4% 4,681,820 -89%
Dec 5, 2012 $0.78 +27% 34,068,856 628%
Mar 13, 2012 $2.71 +250% 12,215,916 -64%

Jun 1, 2013
SHARE
PRICE
OPEN SHORT POSITIONS
Mar 13, 2012
$3.00
$2.50
$2.00
$1.50
$1.50
$0.50
40 million

30 million

20 million

10 million
While the company has been unable to explain the poor
share price performance that has accompanied operational
success, data trends point towards dubious trading activity,
insider activity, possible share price manipulation and
abuses of the system of short selling, all representing issues
deserving of appropriate regulatory attention.
32

7.2.1.13 FURTHER SUBSTANTIAL SHAREHOLDER ANOMALIES:
Credit Suisse has issued several notices in the period from early December 2012 through to the end of April
2013 and all seem to contain data anomalies that require clarification. In particular, the activities of Credit
Suisse affiliates are not always explained by the trading undertaken by their broker. The mismatches in
data suggest that other brokers are engaged in substantial amounts of additional buying and selling to that
undertaken by broker CSUI. Such activity raises serious questions about possible broker collusion and an
unfair or misleading market especially if multiple brokers have been both buying and selling for much the
same interests who may have been privy to inside information. The data flows are certainly open to
interpretation and the situation requires clarification as detailed in the sections that follow.
7.2.1.13.2 INITIAL SUBSTANTIAL SHAREHOLDER NOTICE DEC 13, 2012
Credit Suisse Holdings Australia became a substantial shareholder of Linc Energy on Dec 7, 2012 with a
holding of 28.4 million shares representing 5.23% of the Linc register. During the period Aug 9, 2012
through to Dec 7, Credit Suisse affiliates accumulated around 17 million shares.
Buying and selling disclosures in the notice amounted to 16 pages of data and have been summarized as
follows.
Sells Buys Net Buys
Affiliate Activity 6,784,460 23,907,369 17,122,909

(The figures may contain minor errors because of difficulties in reading some of the data).
The 17.12 million net purchases compare to previous holdings of around 11.26 million shares before Aug 9.
The concern with the notice is that over the same period (Aug 9 to Dec 7) broker Credit Suisse Equities
Australia (Code: CSUI) had trading figures that were widely disparate to the activities of its affiliates.
IRESS trading data for broker CSUI reveals the following trading statistics for CSUI over the period.
Sells Buys Net
Broker Trades 15,771,604 15,443,663 -327,941

The situation raises concerns and such concerns have the potential to impact market integrity in a
significant way. They include:
The heavy selling by CSUI while its affiliates were strongly accumulating shares
The heavy buying on behalf of Credit Suisse affiliates by other brokers while CSUI was churning
stock. Additional purchases amount to 8.5 million shares assuming CSUI buying was for its affiliates.
The contradiction between strong accumulation by Credit Suisse affiliates (17 million shares) while
Credit Suisse the broker showed net sales of 327,941 shares over the same period.
The anomalous trading is also brought to attention by looking at trading data for days when significant
levels of buying or selling took place and where large variations have occurred. Examples include:
Sep-19 Sells Buys Net

Dec-05 Sells Buys Net
Affiliates 7,494 1,320,390 1,312,896

Affiliates 34,790 676,872 642,082
Broker Trades 349,008 290,193 -58,815

Broker Trades 12,301 15,146 2,845
33

In the following examples, significant levels of selling by broker CSUI while accumulation by CSUI affiliates
has occurred is also shaded.

Oct-18 Sells Buys Net

Affiliates 35,337 669,797 634,460

Affiliates 2,745 1,977,559 1,974,814
Broker Trades 39,870 56,772 16,902

Broker Trades 494,345 533,379 39,034

Oct-26 Sells Buys Net

Affiliates 0 1,167,599 1,167,599

Affiliates 2,745 1,977,559 1,974,814
Broker Trades 1,144,603 391,103 -753,500

Broker Trades 796,936 1,044,216 247,280

The prominent brokers in trading during the period Credit Suisse Australia became a major shareholder are
summarized below.
LEADING BROKERS: Period Aug 9 through to Dec 7, 2012
Broker Sells Buys Net Market Share

Net Buyers
UBS 27,778,799 47,595,252 19,816,453 12.3%

UBS 19,816,453 38.1%
COMM 38,050,607 33,581,260 -4,469,347 11.7%

NOMURA 19,081,082 36.7%
CITI 29,128,884 29,281,349 152,465 9.5%

INSTINET 7,152,432 13.8%
DMG 22,819,778 17,356,121 -5,463,657 6.6%

GOLDMAN 3,814,583 7.3%
SOSL 15,922,696 15,412,852 -509,844 5.1%

EUROZ 348,702 0.7%
CSUI 15,771,604 15,443,663 -327,941 5.1%

WILSON 285,380 0.5%
MACQ 17,680,202 13,286,195 -4,394,007 5.1%

PHILIPS 252,024 0.5%
ETRD 15,090,037 15,341,408 251,371 5.0%

ETRADE 251,371 0.5%
MSDW 21,392,034 8,409,195 -12,982,839 4.9%

PATERSON 175,136 0.3%
GS 11,632,531 15,447,114 3,814,583 4.4%

CITIGROUP 152,465 0.3%
BBY 13,601,268 13,230,123 -371,145 4.4%

SUSQ 127,878 0.2%
VIRT 16,805,783 4,723,240 -12,082,543 3.5%

Other 512,144 1.0%
NOM 709,079 19,790,161 19,081,082 3.3%

AIEX 9,797,711 8,509,822 -1,287,889 3.0%

Net Sellers
INST 4,942,316 12,094,748 7,152,432 2.8%

MSDW -12,982,839 25.0%
SUSQ 7,906,419 8,034,297 127,878 2.6%

VIRT -12,082,543 23.2%
CMCS 4,075,465 3,631,327 -444,138 1.3%

DMG -5,463,657 10.5%
MERL 4,914,080 2,488,565 -2,425,515 1.2%

COMM -4,469,347 8.6%
TPPM 3,978,175 3,062,454 -915,721 1.2%

MACQ -4,394,007 8.5%
WEALTH 3,584,431 3,091,740 -492,691 1.1%

MERL -2,425,515 4.7%
ORDS 3,144,766 3,162,645 17,879 1.0%

CIMB -2,260,604 4.3%
PERS 2,415,847 2,339,340 -76,507 0.8%

AIEX -1,287,889 2.5%
MACP 2,188,937 1,535,408 -653,529 0.6%

TPPM -915,721 1.8%
TIMBA 1,663,528 1,476,234 -187,294 0.5%

BELL -804,212 1.5%
CIMB 2,260,604 0 -2,260,604 0.4%

Other -4,883,316 9.4%
Other 8,841,252 7,772,320 -1,068,932 2.7%

4 Brokers accounted for 96% of all net
buying while the leading 4 net sellers
accounted for only 67%.
Totals 306,096,833 306,096,833 0
100%

It is not obvious how Credit Suisse affiliates accumulated the 17 million shares disclosed in the substantial
shareholder notice however attention is drawn to the leading net buyers of stock which include UBS,
Nomura and Instinet.
Attention is also drawn to the leading net sellers of stock including Morgan Stanley, Virtu Financial, Deutsche
Bank and Commonwealth Securities. The trading dominance by leading brokers also needs to be taken into
account particularly if their trading churn was somehow associated with the accumulation taking place.
Certainly the trading activity of the Credit Suisse Group is difficult to reconcile given that it was associated
with a major accumulation of shares that forced substantial shareholder disclosures. Yet the broker CSUI
only had a market share of 5.15% and was associated with net selling, not net buying.
34

7.2.1.13.3 SUBSTANTIAL SHAREHOLDER NOTICE DEC 19, 2012
After becoming a substantial shareholder on Dec 7, 2012, Credit Suisse increased its holding from 5.23% to
6.47% by the additional purchase of 6.3 million shares. The additional net buying took place during the
period Dec 10 to Dec 13, 2012.
A summary of the on-market dealings of Credit Suisse affiliates is provided below together with CSUI
broker data for the same period.

Sells Buys Net
CSUI Affiliates 2,471,567 8,751,206 6,279,639
CSUI Broker Data 5,301,873 6,090,506 788,633

Broker CSUI appears to have churned stock for little net gain compared to the acquisition of shares by its
affiliates. Alternatively, it is possible that CSUI were selling for one client but buying for its affiliates
although there is still a shortfall in buying volumes on behalf of CSUI affiliates. The shortfall is 2.6 million
shares. Whatever the nature of the buying and selling that took place, it is likley that the activities of CSUI
and its affiliates would have impacted price discovery and possibly led to an unfair market. Especially when
other brokers were obviously involved in supporting the accumulation of shares by CSUI affiliates.
The trading data for the leading brokers between Dec 10 and Dec 13 is provided below. The data provides
an indication as to where the additional shares acquired by Credit Suisse affiliates may have come from.

Net Buyers
COMM 11,846,402 8,856,377 -2,990,025 16.1%

INST 10,389,273
INST 932,806 11,322,079 10,389,273 9.2%

DMG 1,432,188
CSUI 5,301,873 6,090,506 788,633 9.1%

GS 886,986
CITI 5,109,828 4,808,777 -301,051 7.7%

VIRT 835,139
UBS 5,488,045 3,213,150 -2,274,895 7.1%

CSUI 788,633
SOSL 4,368,717 4,263,617 -105,100 6.7%

SHAW 82,243
ETRD 5,226,670 2,986,362 -2,240,308 6.6%

MACP 71,738
MACQ 3,903,580 3,275,307 -628,273 5.6%

BTIG 60,000
DMG 2,751,261 4,183,449 1,432,188 5.4%

Net Sellers
SUSQ 2,234,019 2,245,314 11,295 3.4%

COMM -2,990,025
BBY 1,890,788 1,351,143 -539,645 2.6%

UBS -2,274,895
ORDS 1,955,926 1,009,504 -946,422 2.3%

ETRD -2,240,308
GS 844,123 1,731,109 886,986 2.1%

ORDS -946,422
MSDW 1,411,167 1,210,627 -200,540 2.1%

WEALTH -759,479
VIRT 830,034 1,665,173 835,139 2.0%

GETCO -642,378
AIEX 1,375,877 902,295 -473,582 1.8%

MACQ -628,273

To properly clarify trading data the relationships between the various brokers need to be identified . The
dominance by COMM over trading, the high levels of churn undertaken by a a number of brokers and the
large net purchases made by Instinet - all while Credit suisse increased its stake can only be clarified
through the auditing of broker and client accounts.

35

7.2.1.13.4 SUBSTANTIAL SHAREHOLDER NOTICE DEC 31, 2012
Credit Suisse Holdings Australia further increased its control over the register between Dec 14 and Dec 21,
2012 by the net purchase of 6.8 million shares. The holding went from 6.47% to 7.82%.
A summary of the on-market dealings of Credit Suisse affiliates is again provided below together with CSUI

Sells Buys Net
CSUI Affiliates 3,558,192 10,364,476 6,806,284
CSUI Broker Data 1,109,177 1,648,411 539,234

Most of the buying & selling by Credit Suisse Affiliates has clearly been done through brokers other than CSUI.
The trading data for the leading brokers between Dec 14 and Dec 21 is also provided below.

Net Buyers
CITI 15,067,066 12,202,327 -2,864,739 23.3%

INST 7,098,704
COMM 7,334,625 5,518,526 -1,816,099 11.2%

UBS 3,700,734
UBS 3,808,874 7,509,608 3,700,734 9.9%

GS 2,020,000
SOSL 3,972,062 3,881,483 -90,579 6.9%

VIRT 889,803
MACQ 5,214,412 2,419,424 -2,794,988 6.5%

MSDW 787,727
INST 2,154 7,100,858 7,098,704 6.2%

CSUI 539,234
GS 1,254,064 3,274,064 2,020,000 3.9%

DMG 297,970
ETRD 2,380,960 1,730,055 -650,905 3.6%

ITG 121,214
MSDW 1,599,685 2,387,412 787,727 3.5%

Net Sellers
DMG 1,348,867 1,646,837 297,970 2.6%

CITI -2,864,739
CSUI 1,109,177 1,648,411 539,234 2.4%

MACQ -2,794,988
BBY 2,025,662 505,577 -1,520,085 2.2%

WILS -2,099,636
SUSQ 982,485 1,086,403 103,918 1.8%

COMM -1,816,099
WILS 2,099,636 0 -2,099,636 1.8%

BBY -1,520,085
VIRT 539,593 1,429,396 889,803 1.7%

RBSM -1,260,518
RBSM 1,479,890 219,372 -1,260,518 1.4%

MERL -717,252

Interestingly, the brokers who were prominent in trading related to the previous notice (Dec 19) were
again prominent in the Dec 31 Notice with CITI edging out COMM as the dominate influence in the market,
Instinet the major net buyer and a range of brokers prominent with their trading churn. All during a time
when it was Credit Suisse affiliates who increased their ownership over the Linc register.

7.2.1.13.5 SUBSTANTIAL SHAREHOLDER NOTICE JAN 23, 2013
A further increase to the substantial holding of Credit Suisse Australia occurred through the period Dec 24 to
Jan 18, 2013 with an additional 6.01 million of net purchases. Particulars have already been provided in
Section 7.2.1.11 but are again included in context with Credit Suisses other substantial shareholder notices.
The holding increased from 7.827% to 8.82% between Dec 24 and Jan 18.
A summary of the on-market dealings of Credit Suisse affiliates is again provided below together with CSUI

Sells Buys Net
CSUI Affiliates 2,105,398 8,116,939 6,011,541
CSUI Broker Data 1,447,235 3,733,519 2,286,284

A large shortfall in
buying
A shortfall in
selling
36

The trading data for the leading brokers between Dec 24 and Han 18 is summarized below and again shows
the same prominent brokers presiding over the accumulation of shares by Credit Suisse affiliates. Instinet
has been a major accumulator of stock throughout the period covered by all notices up to Jan 23, 2013
including the period where Credit Suisse became a major shareholder. (Refer Table 7.2.1.13.2)

Net Buyers
COMM 18,292,777 14,222,585 -4,070,192 18.9%

INST 4,851,692
UBS 7,908,001 8,252,099 344,098 9.0%

CSUI 2,286,284
MACQ 6,779,436 8,271,683 1,492,247 9.0%

MSDW 1,800,251
SOSL 7,064,062 6,937,080 -126,982 8.1%

BBY 1,724,311
ETRD 6,985,200 5,218,294 -1,766,906 7.0%

MACQ 1,492,247
MSDW 4,195,259 5,995,510 1,800,251 5.7%

VIRT 890,447
CITI 7,344,734 2,490,882 -4,853,852 5.2%

DMG 703,580
SUSQ 3,191,226 2,976,140 -215,086 3.6%

PERS 403,106
AIEX 3,300,969 2,011,664 -1,289,305 3.1%

Net Sellers
CSUI 1,447,235 3,733,519 2,286,284 3.0%

CITI 995,937
BBY 1,546,574 3,270,885 1,724,311 2.8%

COMM 7,128,642
INST 163,577 5,015,269 4,851,692 2.7%

ETRD 14,988,042
CSHK 1,919,584 1,919,584 0 2.5%

AIEX 54,533,784
GS 2,006,311 2,395,887 389,576 2.4%

RBSM 20,094,104
TPPM 1,957,330 1,759,700 -197,630 2.2%

CMCS 8,830,792
DMG 1,250,842 1,954,422 703,580 1.8%

WEALTH 4,149,836

7.2.1.13.6 CHANGE TO SUBSTANTIAL HOLDING APRIL 10, 2013
Credit Suisse Holdings Australia reduced its holding from 8.82% to 6.95% in the period Jan 21, 2013
through to April 4, 2013. The change was announced by the company on April 10, 2013. The net disposal of
shares by Credit Suisse affiliates is summarized below.
Sales Purchases Net
ON Market Dealings 17,297,084 14,153,263 -3,143,821
OFF Market Dealings 7,400,000 0 -7,400,000
Totals 24,697,084 14,153,263 -10,543,821

A comparison of on market trading activity by Credit Suisse affiliates and CSUI broker trading is as follows:

Sells Buys
Affiliates
17,297,084 14,153,263
Broker Activity
29,228,366 23,083,730
The overall comparison is more in line with what might be expected from CSUI servicing both the buying
and selling of its affiliates as well as other clients. However a snapshot of particular days trading again
reveals mismatches between broker trading and the activities of affiliates.

March 28, 2013 and April 4, 2013 are cases in point. Selling by affiliates far exceeded broker selling on April
4, and the buying of affiliates on March 28 also exceeded broker buying. Credit Suisse, the broker, was also
a heavy seller on March 28 while affiliates accumulated shares. The situation suggests that the market may
have been compromised in support of the accumulation of shares by Credit Suisse affiliates.
Apr-04 Sells Buys

Mar-28 Sells Buys
CSUI Affiliates
12,510,057 242,000

CSUI Affiliates
26,192 7,451,910
Broker Activity
826,370 236,974

Broker Activity
9,511,751 5,928,111
A further anomaly on April 4 concerns the 12.51 million shares declared as sold on market when trading
volumes for the day only amounted to 6.2 million shares.
37

The large off-market transaction occurred on March 27 while the company was in a trading halt pending an
announcement regarding finances. Credit Suisse was both a heavy seller and a heavy buyer as soon as
trading resumed on March 28 as shown above. Credit Suisse Hong Kong was also the lead broker for the
convertible note issue that was announced on March 28. Given the involvement of Credit Suisse with the
fund raising the large transfer during the trading halt and the heavy selling upon the release of the
announcement might suggest insider activity.
The substantial dealings by Credit Suisse in the market, and by their affiliates through other brokers as
well, may have compromised fair price discovery and may have contributed to an unfair market for other
participants.

7.2.1.13.7 CHANGE TO SUBSTANTIAL HOLDING APRIL 17, 2013
Credit Suisse Holdings Australia further reduced their substantial shareholder status to 5.79% in the period
April 5, 2013 to April 11, 2013. It involved the net disposal of 6.3 million shares in on-market dealings as
summarized below.
Period Apr 5 to Apr 11 Sells Buys Net
Affiliate Trades
8,216,889 1,942,911 -6,273,978
However broker trading over the same period again suggests that a good deal of the selling undertaken by
Credit Suisse affiliates was handled by other brokers and a substantial portion of the buying as well.
Period Apr 5 to Apr 11 Sells Buys Net
Broker Trades
5,247,730 912,967 -4,334,763

The situation once again puts into question the fairness of the market while shares were disposed of.
The leading brokers for the period Apr 5 to Apr 11 are listed below. The data provides an indication of
where the additional selling and buying of Credit Suisse affiliates may have taken place with around 3
million sales and around 1 million purchases to account for.

Leading Brokers Sells Buys Net Market Share
Commonwealth 4,724,083 6,331,246 1,607,163 21.4%
Credit Suisse 5,247,730 912,967 -4,334,763 11.6%
Macquarie Insto 2,532,241 2,279,045 -253,196 9.5%
E-Trade 1,124,514 1,571,119 446,605 5.4%
Deutsche 1,649,289 1,137,255 -512,034 5.3%
State One Stock 1,253,448 1,327,301 73,853 5.1%
Net Buying

Net Selling

Commonwealth 1,607,163

Credit Suisse -4,334,763
Morgan Stanley 1,432,346

Deutsche -512,034
Instinet 608,196

UBS -395,990
E-Trade 446,605

Macquarie -253,196

The leading role played by Commonwealth Securities across all trading periods makes it a prime candidate
to be assisting Credit Suisse affiliates with their trading objectives.
38

7.2.1.13.8 COMMENT:
There are elements of Credit Suisse dealings in Linc Energy during 2012 and 2013 that appear to provide
some challenges to officially supported market doctrine; doctrine that generally attempts to convey that
the market operates with integrity and provides fair price discovery. Developments that appear to
contradict fair trading principles even though there dont appear to have been any concerns from a
regulatory perspective, include:
CSUI Affiliates gaining a substantial holding, adding to the holding and disposing of the holding
through dealings with the CSUI broker, but also with the support of other brokers. Any co-operation
or indeed collusion between brokers has serious implications for the integrity of the market and for
the fairness associated with price discovery.
Occasional contradictions between the trading activity of the Credit Suisse broker (CSUI) and the
trading activity of affiliates as for example when CSUI selling has coincided with the accumulation
by affiliates through other brokers.
Credit Suisse Hong Kong being the lead broker for a substantial fund raising but also belonging to a
group that amassed a substantial shareholding while contributing to strong price increases.
The market being influenced by Credit Suisses strong market involvement but not privy to the
information likely to be driving the Credit Suisse trading activity.
The contradiction between CSUI Hong Kongs involvement in a substantial fund raising initiative for
the company and the heavy selling by CSUI and its affiliates both before and after a major
announcement.
Implications for the fairness of the market by brokers acting for Credit Suisse affiliates but also
possibly trading on their own account on the basis of instructions given to them by Credit Suisse.
The situation as it presents from publicly available disclosures certainly leads to more questions than
answers. However an acute lack of transparency within the system means that the only way to establish
what has actually taken place and to establish an informed view of the fairness or otherwise of trading, is
through the forensic auditing of broker and client accounts. Unfortunately, audits do not appear to be a
part of the measures used for market surveillance. A system that has no reliable way of establishing
exactly what is taking place cannot be effectively regulated and that leads to an erosion of confidence in
the market itself, especially in view of persistent and widespread data anomalies.
The Credit Suisse dealings do however demonstrate that for a proper understanding of a companys worth
and future prospects, company fundamentals are important but nowhere near as important as the
influences that shape the market and distort value. Indeed, the Linc Energy share price has until recent
times been a poor predictor of the companys true worth.
Unfortunately, officially sanctioned trading behaviours in modern markets (Refer 7.2.1.16) appear to make
the share prices of companies such as Link Energy almost redundant as an indicator of value, particularly
when there are significant company assets involved. Perhaps the best guide to a companys value is the
activity of sophisticated investors in controlling the market and positioning themselves to benefit from
future company developments.
Such positioning appears to be at the expense of retail investors who tend to respond to what turn out to be
false market signals. They also have to compete in an extremely unfair market which tolerates an un-level
playing field. The other investors at risk seem to be those with funds under management whose holdings are
able to be accessed by sophisticated investors and used to implement dubious short selling practices.
39

7.2.1.14 THE INSTUTUTIONAL PRESENCE AMONGST RETAIL BROKERS Commonwealth Securities
In the period from Jan 1, 2010 to April 25, 2013 (i.e.; trading for, 2010, 20111, 2012 & 2013)
Commonwealth Securities (COMM) has been the leading broker in the trading of Linc Energy shares. Total
buying and selling over the period has been 426.5 million shares and 414.4 million shares respectively
representing the net buying of 12 million shares. Their share of all buying and selling equated to 17.2% of
the entire market for the period. Commonwealth Securities is the largest retail broker however its trading
reflects a wide variety of clients particularly institutions.
Given the consistently high market shares achieved by COMM in trading Linc shares its impact on the
market depends on whether its primary business has been on behalf of institutional clients or simply a
random mix of large numbers of retail investors acting independently. Data trends suggest the former and
the trading on high volume days provides a clue as to the impact on the market by institutional investors.
To help demonstrate the influence institutional investors have through Commonwealth Securities the buying
and selling on March 28, 2013 has been assessed from an Institutional Investor versus Retail Investor
perspective. The trading followed the announcement of a premium funding deal and resulted in 23.76
million shares trading.

The funding package was in the form of a convertible note issue designed to raise $200 million. It was put
together with Credit Suisse Hong Kong acting as the lead broker. Credit Suisse was a heavy seller on the
resumption of trading after a trading halt that was implemented while the funding deal was finalized.
However, during the halt on March 27, Credit Suisses substantial shareholder notice of April 10 reveals that
they sold a large parcel of 7.4 million shares off-market perhaps setting the scene for its on-market selling as
soon as trading resumed on March 28. Curiously there was also a large crossing of 7.4 million shares in the
IRESS trading data for March 26 also suggesting some sort of strategic positioning taking place associated
with the upcoming announcement. The trade on March 26 was listed as a S1XT crossing. It is uncertain
whether there was a mistake with the dates and that the crossings were one and the same or if in fact there
were two large crossings involving the same number of shares. The situation requires clarification as the
trading data in its present form, notwithstanding confusion with the crossing, is suggestive of insider activity.

The main features of trading on March 28 were as follows.
.

Net Buyers
CSUI 9,511,751 5,928,111 -3,583,640 32.3%

COMM 2,330,947
COMM 4,704,928 7,035,875 2,330,947 24.8%

MSDW 1,137,344
MACQ 3,410,314 1,927,487 -1,482,827 11.3%

ETRD 632,979
MSDW 328,437 1,465,781 1,137,344 3.8%

AIEX 453,623
BBY 872,918 498,063 -374,855 2.9%

DMG 385,298
DMG 504,414 889,712 385,298 2.9%

INST 266,059
UBS 600,398 719,138 118,740 2.8%

ORDS 189,401
ETRD 314,465 947,444 632,979 2.7%

SUSQ 148,743
SUSQ 510,476 659,219 148,743 2.4%

Net Sellers
INST 385,610 651,669 266,059 2.2%

CSUI -3,583,640
GS 596,566 68,843 -527,723 1.4%

MACQ -1,482,827
SOSL 316,637 337,018 20,381 1.4%

GS -527,723
AIEX 57,010 510,633 453,623 1.2%

BBY -374,855
CITI 213,888 309,566 95,678 1.1%

ARGO -350,000
ARGO 350,000 0 -350,000 0.7%

GETCO -132,976
WEALTH 95,892 221,929 126,037 0.7%

MERL -90,293

Both Credit Suisse and Commonwealth Securities were prominent in trading on March 28 with substantial
volumes of trades put through Commonwealth Securities likely to be the result of institutional trading not
retail investors.
The following chart conveys the minute by minute trading volumes over the course of the day. The brokers
responsible for the trading peaks in the chart have also been identified in the tables that follow.

40

7.2.1.14 .2 MINUTE BY MINUTE TRADING VOLUMES ON MARCH 28, 2013

The average trading volumes per minute of trading across the days trading was 63,943 shares. Trading
volumes in some instances exceeded 600,000 shares per minute as shown in the chart.
The brokers responsible for the dramatic minute by minute trading pulses numbered 1 through to 4 have
been identified and reveal Commonwealth Securities as a major contributor to volatile trading. It confirms
the strong influence of institutional interests acting through this broker. The details are as follows:

0
200,000
400,000
600,000
800,000
1,000,000
Period 1
2
3
4
Period 1: Trading from 10.04 to 10.11 (7 minutes)
Broker Sells Buys Net Share %
COMM 655,866 1,457,420 801,554 25.9%
DMG 4,414 426,393 421,979 5.3%
MSDW 691 124,287 123,596 1.5%
SUSQ 62,432 184,007 121,575 3.0%
PSL 0 109,300 109,300 1.3%
PERSH 0 60,000 60,000 0.7%
ETRD 63,376 113,833 50,457 2.2%
RBSA

40,000 40,000 0.5%
ORDS 7,500 40,000 32,500 0.6%
SOSL 109,115 141,500 32,385 3.1%
CITI 42,212 73,288 31,076 1.4%
BRLL 10,000 35,000 25,000 0.6%
TPPM 2,200 22,700 20,500 0.3%
CLSA 0 14,163 14,163 0.2%
PCAP 0 10,000 10,000 0.1%
AIEX 21,700 28,449 6,749 0.6%
CMCS 11,900 18,300 6,400 0.4%
VIRT 4,300 10,600 6,300 0.2%
CITADEL 3,602 8,384 4,782 0.1%
CSUI 1,138,189 20,000 -1,118,189 14.2%
MACQ 1,385,302 692,810 -692,492 25.5%
BBY 217,301 174,406 -42,895 4.8%
GETCO 31,138 0 -31,138 0.4%
UBS 259,454 243,115 -16,339 6.2%
NATO 21,420 8,264 -13,156 0.4%
TIMB 4,761 3,000 -1,761 0.1%
INST 1,100 0 -1,100 0.0%
MERL 886 0 -886 0.0%
MACP 17,360 17,000 -360 0.4%
Totals 4,076,219 4,076,219 0 100%

Period 2: Trading for 11.37 AM (1 minute)
CSUI 13,588 321,327 307,739 22.5%
SUSQ 0 39,006 39,006 2.6%
ETRD 0 28,400 28,400 1.9%
AIEX 0 20,000 20,000 1.3%
DMG 0 16,401 16,401 1.1%
CMCS 1,150 10,000 8,850 0.8%
BBY 0 8,500 8,500 0.6%
CITADEL 0 8,196 8,196 0.6%
TPPM 0 7,500 7,500 0.5%
MSDW 0 7,410 7,410 0.5%
GS 1,600 8,981 7,381 0.7%
NATO 0 4,600 4,600 0.3%
SBAR 0 2,000 2,000 0.1%
SOSL 0 2,000 2,000 0.1%
COMM 607,003 200,209 -406,794 54.3%
AGNT 50,000 0 -50,000 3.4%
CITI 4,388 0 -4,388 0.3%
UBS 2,000 0 -2,000 0.1%
VIRT 2,000 0 -2,000 0.1%
GETCO 1,800 0 -1,800 0.1%
MACQ 59,389 58,581 -808 7.9%
MERL 193 0 -193 0.0%
Totals 743,111 743,111 0 100%

10 AM 12 4PM
COMM was a major contributor to the
4.076 million shares bought and sold
over a period of 7 minutes
COMM and CSUI were the leading net
sellers and net purchasers of shares
VOLUME
41

Period 3: Trading for 12.14 (1 minute)

Period 3: Trading for 12.35 (1 minute)

MSDW 2,000 4,675
2,675
0.5%

SUSQ 0 129,104 129,104 10.2%
COMM 1,224 3,421
2,197
0.4%

CSUI 0 114,396 114,396 9.0%
MACQ 1,216 2,625
1,409
0.3%

GS 0 27,277 27,277 2.1%
INST 16 974
958
0.1%

AIEX 0 24,000 24,000 1.9%
UBSW
0
18
18
0.0%

MACQ 3595 24,873 21,278 2.2%
ORDS 3,333

-3,333
0.3%

MSDW 1753 13,604 11,851 1.2%
CSUI 603,924 600,000
-3,924
98.4%

SOSL 0 5,000 5,000 0.4%
Total 611,713 611,713 0 100%

ETRD 0 2,608 2,608 0.2%

NATO 0 2,173 2,173 0.2%

BBY 0 1,000 1,000 0.1%

CITI 1300 2,090 790 0.3%

CMCS 0 700 700 0.1%

COMM 605383 288,400 -316,983 70.4%

INST 17405 0 -17,405 1.4%

VIRT 4000 0 -4,000 0.3%

GETCO 1700 0 -1,700 0.1%

MERL 89 0 -89 0.0%

Total 635225 635,225 0 100%

The institutional influence over trading has been further assessed by stripping out the COMM selling orders
for the entire days trading from IRESS trading records. COMM sell orders over 10,000 shares in size have
been regarded as institutional trades with the remainder assumed to represent retail trades.

Buying orders have been treated similarly.

The breakdown of orders is summarized in the table below. The table only includes transactions that
occurred in active trading on March 28, not transactions occurring during the opening and closing auctions.

COMM Selling Volumes COMM Buying Volumes Average Order Size
ORDER TYPE
Shares % Shares % Selling Buying
Retail 809,383 17.4% 1,140,643 17.7% 2,965 3,083
Institutional 3,849,995 82.6% 5,321,293 82.3% 43,258 35,955
Totals 4,659,378

6,461,936

Using the 10,000 share criteria for institutional orders, around 83% of all COMM selling and buying activity can
be attributed to institutions. Also, crossings represent 35% of all COMM selling and 26% of all their buying.
Large crossings were a major feature of the trading pulses outlined previously.

Charts of institutional orders versus retail orders can be used to provide strong insights into the dominance
over trading by institutions operating through Commonwealth Securities as shown in the following examples.

The major influences across all volatile
trading periods has been associated
with brokers COMM and CSUI with
instituional clients likley to be
responsible for the large buying and
selling orders.
Retail Orders
< 10,000 shares

Institutional Orders
10,000 and above
42

7.2.1.14 .3 SELLING PROFILE FOR COMMONWEALTH SECURITIES TRADING ON MARCH 28, 2013
The chart shows the intra day share price range for Linc Energy shares on March 28 where 23,760,451
shares traded. The trading resulted in a fall of 44 cents from the previous close.

The pattern of institutional trades by Commonwealth Securities is also shown below with trades ranging in
size from 10,000 shares to 500,000 shares. The average parcel size of all such trades was 43,258 shares.

By contrast, retail trades had an average parcel size of 2,935 shares and when shown using the same scale
as institutional trades they are are seen to have had a negligible impact on trading.

The large volumes of small retail trades are seen more clearly when the vetical axis is scaled back to 10,000
shares.While prolific in number the small retail orders are swamped by the large volumes of institutional trades.

$2.20
$2.25
$2.30
$2.35
$2.40
$2.45
$2.50
0
100
200
300
400
500
T
h
o
u
s
a
n
d
s

0
100
200
300
400
500
T
h
o
u
s
a
n
d
s

0
5
10
T
h
o
u
s
a
n
d
s

The share price fell 44
cents ( 16.5%) despite a
premium funding deal
being announced
Chart for trades exceeding 10,000 shares in size
(The trades are assumed to represent
institutional selling activity)
Retail trades have been graphed
using the same scale as that used
for institutional trades
Chart for trades under 10,000 shares in size which are
assumed to represent retail trading activity

10 AM 12 4PM
10 AM 12 4PM
VOLUME
VOLUME
VOLUME
43

7.2.1.14 .4 THE BUYING PROFILE FOR COMMONWEALTH SECURITIES TRADING ON MARCH 28, 2013
Similar patterns of trading are also evident for the buying taking place through Commonwealth Securities
on March 28. Institutional buying orders averaged nearly 36,000 shares per trade compared to retail
orders which averaged around 3.000 shares. Institutional buys represented around 82% of all COMM
buying orders.

The impact of retail investors with their buying compared to institutional buying is seen to be relatively
minor when contrasted on the same scale as that used for the larger institutinal orders.

The trading noise provided by retail investors is again highlighted more fully using a scale more in keeping
with the small orders supplied to the market. They are nevertheless swamped by institutional volumes.

0
50
100
150
200
250
300
T
h
o
u
s
a
n
d
s

0
50
100
150
200
250
300
T
h
o
u
s
a
n
d
s

0
2
4
6
8
10
T
h
o
u
s
a
n
d
s

Chart of COMM Buying where parcel sizes exceed 10,000 shares
(assumed to be on behalf of institutions)
Chart of COMM Buying where parcel sizes are less than 10,000 shares
(assumed to represent mostly retail investors)
Retail Trades using a much reduced scale
Same scale as that
used for institutional
buying data
10 AM 12 4PM
10 AM 12 4PM
VOLUME
VOLUME
VOLUME
44

The assumption of retail orders being less than 10,000 shares in size is reasonable for the bulk of
Commonwealth Securities trading where large numbers of retail clients are catered for. However it doesnt
follow that institutional brokers dont deal in small parcel sizes. They do and in a substantial way with their
algorithms generating the notorious 1 share trades and other trades of small parcel sizes that are difficult
to comprehend from a retail investor perspective.
The trading of Credit Suisse on March 28, 2013 is a case in point. The selling volumes for CSUI have been
treated similarly to Commonwealth Securities by segregating the orders into transactions of less than 10,000
shares and transactions consisting of 10,000 shares or more. The average parcel sizes of the two groups of
trades were 59,974 and 3,076 respectively with the larger trades representing 87% of all CSUI selling.
Interestingly, crossings by CSUI represented 50% of the large amount of CSUI selling that took place.

The large numbers of small selling transactions resemble the retail transactions associated with
Commonwealth Securities and equate to similar volumes overall. (CSUI 1.06 million COMM 0.81 million)
However, the CSUI trades less than 10,000 shares in size represent only 13% of the selling by CSUI overall.

0
100
200
300
400
500
600
700
T
h
o
u
s
a
n
d
s

0
100
200
300
400
500
600
700
T
h
o
u
s
a
n
d
s

The small orders associated with CSUI
trading graphed using the same scale
as that used for their larger orders.

0
2
4
6
8
10
12
T
h
o
u
s
a
n
d
s

Credit Suisse Selling - parcel sizes < 10,000 shares

Credit Suisse Selling - parcel sizezes > 10,000 shares
10 AM 12 4PM
Credit Suisse Selling - parcel sizes < 10,000 shares
10 AM 12 4PM
VOLUME
VOLUME
VOLUME
45

7.2.1.14 .5 THE INSTUTUTIONAL PRESENCE AMONGST RETAIL BROKERS Etrade Securities
Broker E*TRADE Australia Securities (Code: ETRD) was the second most active participant in the market on
March 25, 2013. A summary of the trading statistics of the leading brokers is as follows.
.

Net Buyers
COMM 7,647,218 8,898,523 1,251,305 26.9%

COMM 1,251,305
ETRD 2,203,036 2,657,093 454,057 7.9%

INST 840,522
SOSL 2,353,287 2,356,051 2,764 7.7%

UBS 686,086
DMG 1,874,852 2,100,180 225,328 6.4%

MOELIS 488,100
UBS 1,364,953 2,051,039 686,086 5.5%

ETRD 454,057
BBY 2,093,800 723,320 -1,370,480 4.4%

WEALTH 320,453
MACQ 1,509,944 848,300 -661,644 3.9%

AIEX 295,456
CSHK 1,012,806 1,012,806 0 3.3%

GS 289,202
MSDW 1,632,494 366,414 -1,266,080 3.3%

Net Sellers
CSUI 1,019,225 876,486 -142,739 2.9%

BBY -1,370,480
SUSQ 698,669 782,263 83,594 2.4%

MSDW -1,266,080
AIEX 554,404 849,860 295,456 2.3%

RBC -989,366
CITI 665,978 745,829 79,851 2.2%

MACQ -661,644
WEALTH 463,920 784,373 320,453 2.0%

RBSM -356,926
MACP 631,967 485,217 -146,750 1.8%

MACP -146,750
CMCS 523,870 474,657 -49,213 1.7%

CSUI -142,739

The participation of institutions as buyers within ETRD has again been assessed in terms of the parcel sizes
of the buying transactions that took place. Purchase orders of 10,000 shares or more have been regarded
as institutionally based and orders below that threshold are assumed to represent retail investors. The
reality is that some retail investors would trade in parcel sizes greater than 10,000 shares and some
institutional investors would trade in parcels less than 10,000 shares. However, the former situation would
be minimal as retail orders are generally smaller in size although large numbers of institutional orders are
likely to be mixed amongst retail orders especially in the buying range 5,000 shares to 9,999 shares.
The results are summarized in the following charts.

0
50,000
100,000
150,000
200,000
250,000
Orders of more than 10,000 shares in size averaged 22,722 in size
and represent 65% of all ETRD buying not including auctions.

0
50,000
100,000
150,000
200,000
250,000
10 AM 12 4PM
10 AM 12 4PM
INSTITUTIONAL BUYING PROFILE FOR ETRADE
RETAIL BUYING PROFILE FOR ETRADE
Orders of less than 10,000 shares in size averaged 2,482 in size
and represent 35% of all ETRD buying not including auctions.
VOLUME
VOLUME
46

The data suggests a strong institutional influence within Etrade as buyers on March 25 and within
Commonwealth Securities as buyers as well.
7.2.1.14 .6 DATA SUMMARY COMPARISONS: for buying through Commonwealth Securities and Etrade.
Mar 25, 2013
COMM BUYING
ETRD BUYING
Totals Per cent Average
Institutions 5,748,635 70% 22,812

1,658,742 65% 22,722
Retail 2,521,575 30% 2,872

890,931 35% 2,482
Totals 8,270,210

2,549,673

Remarkably, the instituional influences across both brokers have left an almost identical data footprint.

Similar trends involving institutional dominance over trading in both Etrade and COMM are also evident in
the selling that took place on March 25, 2013. A data comparison is provided in the following table. The
consistent institutional footprint across both brokers regarding buying is also evident in the selling data.

COMM BUYING
ETRD BUYING
Institutions 4,843,683 68% 24,098

1,444,582 68% 25,344
Retail 2,285,748 32% 2,818

678,424 32% 2,692
Totals 7,129,431

2,123,006

The trends although based on estimations as to what constitutues an institutional trade, could readily be
confirmed through a check of the register and through the auditing of accounts of brokers on March 25.

0
20,000
40,000
60,000
80,000
100,000
120,000
0
20,000
40,000
60,000
80,000
100,000
120,000
INSTITUTIONAL BUYING PROFILE FOR COMM
RETAIL BUYING PROFILE FOR COMM
The issue is an important one as institutional manoeuvring that could make for an unfair market for other
investors could involve large orders passing through retail brokers where they are masked or camouflaged by
retail activity. The net effect could be to assist institutions in imposing their collective will over the market
particularly if large trades through retail and institutional brokers link back to much the same shareholder
accounts. The result could be an extremely unfair monopoly over trading by sophisticated investors.
Importantly, there are precedents for such trading activity as demonstrated in research concerning CuDeco.

Average Insto trade
size similar to ETRD
Average retail trade
size similar to ETRD
The split between Instutional volumes and retail volumes was around 70:30 for both brokers
Average parcel
sizes are similar
for both brokers
47

7.2.1.15 LEADING BROKERS ACROSS ALL TRADING: Period Jan 2010 to April 24, 2013
The previous section examined the influence of institutional investors in the trading data of brokers who
identify with large numbers of retail investors as well as corporate clients. The influence has been shown to
be quite profound through critical trading periods for COMM and ETRD.
The influence of institutional investors is therefore seen to spread across the entire broker fraternity
including:
Leading institutional brokers such as Credit Suisse (CSUI), Citigroup (CITI), Deutsche Bank (DMG),
UBS, Macquarie (MACQ), Merrill Lynch (MERL), Goldman Sachs (GS), JP Morgan (JPM), BBY Ltd and
others, and;
Leading brokers with large retail client bases as well as their corporate clients such as COMM, ETRD
and AIEX.
Research into CuDeco has demonstrated how it is virtually impossible to track the activities of large
shareholders who generally have their holdings registered with institutional investment banks and in some
cases the holdings are split amongst multiple institutions. Their trading through multiple brokers (with
large volumes of buying and selling put through the market via broker trading algorithms) is virtually
untraceable from broker data and registry records.
Institutional trades by brokers (whether they be corporate brokers or retail brokers), are generally settled
by other agents and/or custodians, not the brokers responsible for the transactions in the market. Trading
activity is therefore effectively concealed within the nominee holdings of institutional investment banks
with no reference to the brokers responsible for executing the trades. It makes the task of determining
who has been responsible for market events particularly difficult if nigh on impossible, especially without
the auditing of broker and client accounts.
Trading is generally obscured by the current trading and settlement system particularly when buying and
selling does not trigger the compulsory reporting guidelines that apply to substantial shareholders. Most
trading is able to avoid such reporting guidelines and so remains hidden from view with only retail
investors fully accountable for their trading activity. The situation makes it entirely possible for the market
to be severely compromised by institutional buying and selling such as when:
The bulk of the orders processed by a wide cross section of brokers relate back to a few major
entities, with imbalances in trading adjusted off-market or through dark pools, or when;
Institutions support each other with their trading objectives and use multiple brokers to implement
their trading agendas, or when;
Institutions effectively trade back and forth between themselves with orders distributed amongst a
number of brokers but when aggregated and netted out by custodians, no substantial changes to
ownership occur. As such, the trading can be likened to a sophisticated form of wash trades that
meet with regulatory approval, or when;
Institutions short sell shares on-market to their trading partners to reduce prices and then manage
exposures off-market and recover shares off-market where true price discovery is avoided.

48

A system where the entities responsible for major changes to company share prices cannot be reliably
identified, even when registry data and broker data are used in conjunction, is likely to encourage the
pursuit of unfair trading agendas. It makes the prospect of share price manipulation a very real concern -
particularly in the absence of regulatory audits. In the current environment, audits represent the only
means of fully establishing what has occurred with trading, yet they seldom if ever occur.
With the above in mind, any ambiguities with broker trends associated with the trading of Linc Energy
shares need to be observed with an appreciation that unusual and/or pronounced trading trends may be
signalling unfair trading strategies playing which are in effect supported by the acquiescence of regulators
and market surveillance teams.
The data that follows looks at a year by year breakdown of trading with the prominent brokers by market
share highlighted (i.e.; dominance over buying & selling) together with the leading net sellers and net
buyers of stock.
While broker share flows and broker prominence fluctuate markedly, the constants that remain are high
levels of trading churn and a lack of transparency associated with the majority of trading.
7.2.1.15.2 JANUARY TO APRIL 25, 2013
Broker
Sells Buys Net Market Share Net Buyers
COMM 105,874,720 111,619,468 5,744,748 24.2%

INST 12,287,714
MACQ 39,077,856 35,526,900 -3,550,956 8.0%

COMM 5,744,748
ETRD 33,104,412 32,176,193 -928,219 7.2%

MSDW 4,945,891
CSUI 35,093,688 24,470,883 -10,622,805 6.7%

MERL 1,918,514
UBS 28,280,328 30,105,856 1,825,528 6.2%

UBS 1,825,528
SOSL 24,865,322 24,502,752 -362,570 5.3%

VIRT 1,805,330
DMG 18,685,826 19,294,954 609,128 4.4%

CLSA 1,148,865
MSDW 16,569,393 21,515,284 4,945,891 4.0%

JPM 767,521
BBY 15,349,910 13,752,567 -1,597,343 3.2%

Net Sellers
SUSQ 13,107,154 13,067,038 -40,116 2.8%

CSUI -10,622,805
CITI 13,298,132 12,490,529 -807,603 2.7%

MACQ -3,550,956
AIEX 12,430,512 11,552,791 -877,721 2.6%

GETCO -2,230,470
INST 4,203,350 16,491,064 12,287,714 2.2%

RBSM -1,976,631
WEALTH 7,579,586 7,904,173 324,587 1.7%

BBY -1,597,343
VIRT 6,852,257 8,657,587 1,805,330 1.7%

SBAR -1,527,174
CITADEL 6,099,984 6,099,984 0 1.4%

RBC -1,466,097

7.2.1.15.3 JANUARY TO DECEMBER, 2012
2012
COMM 127,788,369 140,070,578 12,282,209 13.8%

INST 11,854,575
CITI 135,826,467 106,046,984 -29,779,483 13.4%

MSDW 2,559,086
UBS 90,998,638 94,789,986 3,791,348 9.2%

UBS 2,432,591
DMG 69,942,045 60,343,598 -9,598,447 6.6%

COMM 2,379,899
CSUI 55,321,285 64,614,707 9,293,422 6.5%

VIRT 2,209,660
MACQ 57,537,264 51,318,240 -6,219,024 6.0%

MERL 1,588,992
ETRD 44,727,488 50,797,805 6,070,317 4.8%

CLSA 1,131,365
MSDW 60,639,941 27,095,834 -33,544,107 4.7%

DMG 1,016,753
GS 34,115,762 49,759,183 15,643,421 4.2%

Net Sellers
SOSL 39,342,974 39,202,991 -139,983 4.0%

MACQ -3,079,335
INST 22,019,107 48,136,947 26,117,840 3.6%

CSUI -2,417,242
BBY 35,248,186 32,887,272 -2,360,914 3.5%

RBSM -2,136,297
AIEX 30,315,004 37,833,845 7,518,841 3.3%

GETCO -1,862,349
SUSQ 21,469,334 21,286,127 -183,207 2.1%

BBY -1,637,196
VIRT 26,342,172 15,309,500 -11,032,672 2.0%

ETRD -1,586,713
TPPM 13,028,942 13,462,120 433,178 1.5%

PSL -1,554,011
49

2012
CITI 84,655,244 89,338,517 4,683,273 19.1%

AUST 13,805,366
COMM 58,282,617 57,787,058 -495,559 11.8%

MACQ 5,720,742
DMG 46,479,286 42,858,504 -3,620,782 9.0%

CITI 4,683,273
UBS 50,400,557 37,237,950 -13,162,607 8.7%

CIMB 3,603,962
MACQ 28,602,202 34,322,944 5,720,742 7.1%

ITG 2,751,632
MSDW 22,958,348 22,617,850 -340,498 5.1%

AIEX 1,296,184
BBY 26,064,969 19,816,048 -6,248,921 4.8%

PERS 1,113,572
GS 20,578,708 20,222,221 -356,487 4.2%

CCZ 816,000
CSUI 15,649,275 15,476,646 -172,629 3.4%

Net Sellers
ETRD 16,130,561 15,728,941 -401,620 3.4%

UBS -13,162,607
NOM 14,816,810 13,883,605 -933,205 3.2%

BBY -6,248,921
AIEX 12,638,901 13,935,085 1,296,184 2.8%

DMG -3,620,782
INST 15,561,203 14,091,475 -1,469,728 2.8%

SBAR -1,862,629
AUST 2,095,271 15,900,637 13,805,366 1.8%

INST -1,469,728
MERL 6,549,976 6,907,070 357,094 1.4%

BELL -1,175,749
SBAR 5,860,871 3,998,242 -1,862,629 1.1%

WILS -1,168,953

2012
COMM 122,433,588 116,976,532 -5,457,056 19.1%

UBS 14,926,643
DMG 73,505,613 60,237,463 -13,268,150 10.8%

CITI 7,771,511
CITI 39,123,226 46,894,737 7,771,511 7.6%

MACQ 6,114,203
UBS 29,017,409 43,944,052 14,926,643 6.6%

SBAR 3,832,449
MSDW 35,052,706 37,660,244 2,607,538 6.4%

INST 3,697,585
ETRD 35,399,398 31,501,746 -3,897,652 5.2%

GS 2,952,394
BBY 38,871,346 24,567,145 -14,304,201 5.1%

JPM 2,810,926
MACQ 22,806,346 28,920,549 6,114,203 4.5%

CSUI 2,614,047
GS 24,163,934 27,116,328 2,952,394 4.3%

Net Sellers
AIEX 26,590,516 24,784,433 -1,806,083 4.1%

BBY -14,304,201
MERL 23,120,321 17,296,823 -5,823,498 3.0%

DMG -13,268,150
CSUI 15,778,353 18,392,400 2,614,047 2.8%

MERL -5,823,498
SOSL 15,710,691 15,889,263 178,572 2.5%

COMM -5,457,056
INST 11,681,822 15,379,407 3,697,585 2.2%

ETRD -3,897,652
SBAR 5,387,033 9,219,482 3,832,449 1.5%

BELL -3,281,335
SUSQ 9,307,029 9,261,460 -45,569 1.5%

AIEX -1,806,083

7.2.1.15.6 COMBINED TRADING: Jan 1, 2010 to Apr 25, 2013
2012
COMM 414,379,294 426,453,636 12,074,342 17.2%

INST 40,633,411
CITI 272,903,069 254,770,767 -18,132,302 10.8%

NOM 17,790,707
DMG 208,612,770 182,734,519 -25,878,251 7.8%

GS 17,597,804
UBS 198,696,932 206,077,844 7,380,912 7.6%

AUST 16,510,902
MACQ 148,023,668 150,088,633 2,064,965 6.4%

COMM 12,074,342
ETRD 129,361,859 130,204,685 842,826 5.1%

UBS 7,380,912
MSDW 135,220,388 108,889,212 -26,331,176 5.1%

AIEX 6,131,221
CSUI 121,842,601 122,954,636 1,112,035 4.7%

ITG 4,379,841
BBY 115,534,411 91,023,032 -24,511,379 4.2%

Net Sellers
GS 85,736,497 103,334,301 17,597,804 3.5%

MSDW -26,331,176
AIEX 81,974,933 88,106,154 6,131,221 3.2%

DMG -25,878,251
SOSL 84,160,327 83,879,332 -280,995 3.1%

BBY -24,511,379
INST 53,465,482 94,098,893 40,633,411 2.7%

CITI -18,132,302
SUSQ 48,804,647 48,639,717 -164,930 1.8%

VIRT -9,364,814
MERL 42,805,766 34,466,611 -8,339,155 1.5%

MERL -8,339,155
NOM 17,493,129 35,283,836 17,790,707 1.1%

BELL -6,258,515

The outstanding feature of all trading is the dominance associated with Commonwealth Securities. Accompanying their
dominance is the large amount of institutional trading that intentionally or otherwise, is camouflaged from the market.
50

7.2.1.16 CONTROL OVER PRICES:
Share price fluctuations whether up or down, are an important driver of investor activity and may override
the impact of company developments or the influence of external markets. For example, activity that can
manipulate prices lower is capable of triggering investor panic where irrational judgements can take prices
even lower especially when stop losses are triggered. Such activity can lead to severe undervaluation as
alluded to by Linc Energy in its response to the price query on May 24, 2012.
Share prices are taken to be the final arbiters of value and an indication of the financial health of
companies. Any distortion to price discovery through unfair activity has critical ramifications for
companies and their shareholders but also for the integrity of the market itself.
Concerns about unfair price discovery outcomes stem from:
Brokers colluding with their trading in passing large volumes of shares back and forth between
themselves for no significant changes to holdings (i.e.; non-genuine trading churn),
and/or,
Entities engaging in activity where large volumes of buying and selling are distributed across a
majority of brokers which at the end of the day effectively results in trades netting out and minimal
changes to holdings. As such they may be regarded as a sophisticated form of wash trades that
meet with regulatory approval;
Entities dealing in large volumes of shares in dark pools and in other spurious off-market
transactions. Such dealings may be providing a mechanism to address trading imbalances created
by the selling of shares to affiliates or trading partners in an attempt to manage pricing outcomes.
The balancing of holdings in such instances avoids proper price discovery;
Entities deliberately selling (to trading affiliates or themselves) into promising announcements to
detract from a companys achievements and to create confusion;
Short selling strategies where exposures created by short selling on-market are managed and re-
adjusted off-market where proper price discovery is avoided;
Algorithms that appear to force Down Ticks between particular brokers and also use various types
of crossings to manage prices lower;
The withdrawal of liquidity at crucial times whereby algorithmic buy orders are reduced in response
to genuine sell orders being placed into the market. Unfilled sells are then used to leverage further
falls by either encouraging the seller to accept less or by forcing other sellers to accept less. The
situation resonates with the experiences of genuine retail traders who constantly face the
frustration of being forced to pay more when buying and accepting less when selling because of the
actions of HFT trading algorithms, and;
Control over auction outcomes
The setting of prices that takes place through auctions is an integral part of the price discovery process.
The auction to commence trading often sets the scene for the trading that is to follow and the close of day
auction is the final benchmark for the performance of a company on a particular day.
Consistently high levels of control over the setting of prices at auctions are therefore an important
indicator of possible share price manipulation.

51

7.2.1.16.2 DOWN TICK TRENDS
The following table contrasts broker statistics in regard to being the seller of DTs (Column 1) and the
buyers of DTs (Column 2). The dominant brokers are circled.
Also provided in the table is a comparison of:
Broker involvement as sellers of Down Ticks (3) compared to their overall level of selling (4);
Broker involvement as buyers of Down Ticks (5) compared to their overall levels of buying (6).
1 3 4

2 5 6
Broker
DT Sells
% of DT
Sells
% of All
Selling

Broker DT Buys
% of DT
Buys
% of All
Buying
UBS 972 29.5% 15.5%

UBSW 339 10.3% 5.1%
MSDW 478 14.5% 7.5%

MSDW 406 12.3% 2.2%
CSUI 337 10.2% 11.7%

CSUI 456 13.8% 7.2%
COMM 208 6.3% 13.0%

COMM 512 15.5% 19.4%
DMG 252 7.6% 8.1%

DMG 211 6.4% 7.2%
MACQ 257 7.8% 4.3%

MACQ 74 2.2% 3.0%
CITI 107 3.2% 7.2%

CITI 185 5.6% 6.7%
ETRD 94 2.9% 4.2%

ETRD 161 4.9% 8.1%
VIRT 59 1.8% 1.0%

VIRT 167 5.1% 1.0%
AIEX 66 2.0% 3.5%

AIEX 121 3.7% 7.3%
GS 85 2.6% 3.3%

GS 93 2.8% 7.6%
SOSL 59 1.8% 2.4%

SOSL 89 2.7% 2.7%
INST 4 0.1% 3.4%

INST 120 3.6% 3.5%
MERL 52 1.6% 0.7%

MERL 52 1.6% 0.5%
JPM 63 1.9% 0.2%

JPM 21 0.6% 0.2%
TPPM 27 0.8% 1.6%

TPPM 37 1.1% 2.2%
CMCS 19 0.6% 0.6%

CMCS 41 1.2% 1.6%
MACP 32 1.0% 1.4%

MACP 27 0.8% 1.7%
SUSQ 23 0.7% 2.7%

SUSQ 25 0.8% 2.5%
Other 102 2.9% 7.4%

Other 159 4.8% 10.2%

Points of Note:
Brokers UBS and MSDW have clearly had a far greater influence in forcing prices lower than their
overall levels of selling in the market would suggest. The dominance by UBS is particularly telling.
Brokers UBS, MSDW and CSUI have also had a disproportionate influence in facilitating Down Ticks
as buyers compared to their levels of buying across the market generally.
Combining the selling and buying statistics in relation to Down Ticks further accentuates the dominant
brokers in relation to causing reductions in the share price of Linc Energy during May 2012.
Broker Total Down Ticks % All DTs Overall Market Share
UBS 1311 19.9% 10.5%
MSDW 884 13.4% 5.4%
CSUI 793 12.0% 9.1%
COMM 720 10.9% 16.3%
DMG 463 7.0% 7.8%
MACQ 331 5.0% 3.7%
CITI 292 4.4% 7.0%
ETRD 255 3.9% 6.1%
VIRT 226 3.4% 1.0%
AIEX 187 2.8% 5.4%
GS 178 2.7% 5.3%
SOSL 148 2.2% 2.5%
INST 124 1.9% 3.4%
MERL 104 1.6% 0.6%
JPM 84 1.3% 0.2%
TPPM 64 1.0% 1.9%
Other 428 6.1% 13.8%
Both UBS and MSDW have being
extremely active in forcing reductions
in price and have been supported by a
number of other brokers to varying
degrees.
Also, the emphasis given by UBS to net
selling and to forcing price reductions
during May needs to be viewed in
context with the accumulation that
has occurred within its affiliates. Refer
Table 7.2.1.8.5. The dealings may be
signalling market integrity concerns.
?
?
52

7.2.1.16.3 CONTROL OVER AUCTIONS
The involvement of brokers in auctions throughout May 2012 has been summarized in the tables that
follow. The individual impact of brokers as sellers at each auction has been expressed as a percentage of all
selling so that comparisons can easily be made. The same has been done for buying.
Consistent high levels of involvements in auctions whether as sellers or buyers provides an indication of
the levels of dominance by brokers, or groups of brokers, over the setting of prices, Brokers working
together or being used collectively to implement trading agendas raises market manipulation concerns.
The situation for Linc Energy in the closing auction on May 3 is provided as an example.
May 3, Closing Auction Details
Sellers Volume % Sells

Buyers Volume % Buys
CITI 2,921 1.6%

AIEX 4,500 2.5%
COMM 5,250 2.9%

BBY 65,298 35.9%
DMG 2,941 1.6%

CITI 2,000 1.1%
GETCO 15,147 8.3%

COMM 15,000 8.3%
GS 10,291 5.7%

CSUI 9,907 5.5%
INST 14,224 7.8%

DMG 10,573 5.8%
JPM 6,678 3.7%

MACQ 4,457 2.5%
UBSW 119,807 65.9%

ORDS 40,000 22.0%
VIRT 4,479 2.5%

SUSQ 16,130 8.9%

UBSW 13,873 7.6%
Totals 181,738 100.0%

Totals 181,738 100.0%

Auctions consist of a continuous process where an indicative closing price is reflected for all buying and
selling quotes entered in the system up until a cut-of point. At the cut-off, a final outcome is determined by
an algorithm that finds a match price that suits the largest numbers of buying and selling quotes entered
into the system.
Control over auctions can be achieved by the supplying of buying and/or selling orders of sufficient size to
influence the final outcome. It doesnt mean that large orders need to be supplied to the system to over
power all other quotes, but rather sufficient shares to tip the balance in favour of a required outcome is all
that is required.
If brokers were to act in unison to achieve shared trading objectives such control over final pricing
outcomes would be readily achievable. For example if brokers UBS, GETCO, GS and INST on May 3
happened to be all selling on behalf of the same interest or related interests, who were also represented
by the buying by BBY, UBS, ORDS and CSUI then the case for manipulation would be strongly suppported.
Importantly, only the auditing of trading records could clarify the situation beyond all doubt, and the need
for such audits is considered absolutely necessary as thesort of trends evident on May 3 are not an isolated
example.

Dominant
Seller
Dominant
Buyers
53

7.2.1.16.4 AUCTION SUMMARIES FOR ALL OF MAY 2012
The results of each broker for the May 3 PM Auction above, when combined with the results for each
auction throughout May 2012, results in the following summary of auction trading. Cummulative broker
performance as both sellers and as buyers provides a window into who the prominent brokers have been
in controlling auction prices.
BROKER
AM Auctions
Sells %
AM Auctions
Buys%
Totals

BROKER
PM Auctions
Sells %
PM Auctions
Buys %
Totals
COMM 339% 563% 901%

COMM 460% 202% 662%
BBY 309% 240% 549%

BBY 36% 610% 646%
UBSW 384% 113% 497%

UBSW 480% 135% 615%
ETRD 61% 163% 224%

CSUI 167% 109% 275%
MSDW 201% 18% 219%

CITI 150% 88% 238%
CSUI 129% 65% 194%

MSDW 138% 39% 176%
MACQ 105% 87% 193%

MACQ 85% 85% 171%
CITI 87% 69% 156%

DMG 36% 99% 135%
AIEX 65% 73% 138%

INST 59% 49% 107%
DMG 27% 98% 125%

GS 24% 83% 106%
TPPM 13% 58% 71%

JPM 49% 44% 93%
RBSM 2% 56% 57%

AIEX 27% 44% 70%
SOSL 13% 43% 56%

ETRD 24% 43% 67%
MERL 24% 23% 47%

ORDS 8% 41% 48%
GS 2% 41% 44%

SUSQ - 39% 39%
BELL - 27% 27%

MACP 18% 12% 30%
MACP 20% 5% 26%

GETCO 19% 4% 23%
WILS - 26% 26%

PERSH 4% 14% 18%
Other 20% 34% 54%

Other 20% 61% 81%

Also evident in the data is a tendency by brokers to alternate from one day to the next in being a strong
buyer in one auction and a strong seller at another. The alternating roles means that no single broker
shows up with an overly dominating profile. Taking turns at being dominant but acting for much the same
intsitutional interests would also suggest collusion by brokers or at least by the trading entities supplying
instructions to brokers. In any case all of the prominent brokers primarily service institutional interests.
The strong performance by UBS in all auctions, particularly as a seller, ties in with the influence they have
had with facilitating Down Ticks in price. It raises questions about their motivations for being so prominent
with their trading and in being responsible for helping to set lower prices. The dominance by broker
Commonwealth Securities particularly in opening auctions also suggests that institutional influences, not
retail clients, are behind much of COMMs auction activity.
Of particular note also is the strong performance by broker BBY Ltd in both opening and closing auctions.
BBY is also identified with servicing the orders of predominantly institutional and/or sophisticated
investors.
Combining auction involvements as both sellers and buyers across all auctions provides further clarity
about prominent broker activity throughout auctions.

54

The results for the leading brokers are as follows.
BROKER AUCTION SELLS %
AUCTION BUYS %
TOTALS %
COMM 798% 765% 1,563%
BBY 345% 850% 1,195%
UBSW 864% 248% 1,112%
ETRD 227% 272% 499%
MSDW 351% 106% 457%
CSUI 266% 103% 370%
MACQ 191% 173% 363%
CITI 123% 168% 291%
AIEX 124% 121% 245%
DMG 51% 180% 231%
TPPM 62% 102% 164%
RBSM 28% 100% 128%
SOSL 37% 86% 123%
MERL 31% 64% 95%
GS 2% 80% 82%
BELL 18% 39% 57%
MACP 39% 9% 48%
WILS 4% 40% 44%
OTHER 28% 58% 87%

All leading brokers other than COMM and ETRD are directly identifiable with institutional interests. A
regulatory check of the clients actually serviced by both COMM and ETRD during auctions would clarify if
institutional influence has also manifested through these brokers during auctions. Of course their trading
generally has already been noted for strong institutional involvement.
Institutions may in effect be operating as a cartel like group who are substantially involved in unfairly
managing prices including what occurs during auctions. Certainly, data trends identified through research
strongly suggests that such behaviours are by no means restricted to Linc Energy.

These brokers have been extremely active
as both buyers and sellers during auctions,
suggesting a strong motivation to influence
pricing outcomes.
55

7.2.1.16.5 CONCLUDING COMMENTS:
Trading and reporting data strongly suggests that the market in Linc Energy shares has been compromised
throughout the period covered by research.
Issues of concern include:
Poor price performance for most of the 3 years of trading reviewed, including a grossly
undervalued share price during May 2012;
A dysfunctional market with heavy short selling leading to lower prices and short covering occurring
off-market without price impact immediately before a dramatic rise in the share price;
Trading anomalies with persistent mismatches with official data regarding short selling and
securities lending;
Concerning anomalies associated with substantial shareholder data where the trading of affiliates is
contradictory to the profile of their broker in the market and where collusion between brokers
looks to have taken place in the building of positions and the selling down of holdings, and;
Issues with the bulk of institutional trading being camouflaged amongst the largest retail broker,
Commonwealth Securities perhaps to take the spotlight off the impact that large institutional
orders have had on the market;
Trading issues and transparency issues associated with high levels of trading churn back and forth
between sophisticated investors but with only marginal changes to beneficial ownership;
Control over pricing levels as suggested by:
o Anomalous auction trends, and;
o Anomalous down tick trends;
Finally, despite all that has been identified through research into trading and reporting data, there is the
issue of regulation or more particularly, an apparent lack of regulation. All trading irregularities identified
have obviously been sanctioned as no regulatory queries have ever been raised publicly concerning the
companies reviewed by research.
The situation seems to suggest that rorting, unfair trading, insider activity, and market manipulation are
either absent from the market and that there are other explanations to address widespread anomalies or
that the system actually tolerates such activities because of overly flexible trading guidelines and an inability
by regulators to deliver fair and transparent markets under current arrangements.
If there are other acceptable explanations for persistent trading irregularities and data anomalies then they
should be made known by those responsible for supervising our markets so that investors may be fully
informed. Only then can investors make appropriate judgements about the risk profile of investments and
the suitability of the share market in attempting to achieve long and short term investment objectives.
Currently, retail investors face a three way squeeze in the market
Firstly they are subjected to an extremely un-level playing field when attempting to buy and sell
because of sophisticated HFT trading algorithms, which invariably forces them to pay more for stock
when buying and to accept less when selling;
Secondly, promising companies that they invest in for long term growth are being subjected to price
suppression activities that put projects at risk and often results in companies being taken over for a
fraction of their true worth, and;
Thirdly, investors with funds under management whether it be through superannuation funds or
private investment capital can find that it is their shares that are sacrificed for short selling practices
that deliver bumper profits to sophisticated investors in return for severe capital depreciation for the
managed portfolios. Fees for making stock available for lending have in the main been miniscule
compared to the destruction of wealth resulting from short selling.
56

If the system has evolved to allow practices such as the ones described by research to take place
unrestrained, then perhaps Treasury and ASIC need to drop the pretence of fair and transparent markets
and tell it like it is. In which case they should also address compulsory superannuation legislation where
individuals are forced to participate in a system that now functions more as a Casino than the market
system of high integrity that it was originally meant to be.
The other option is to cease the ineffective gesturing and grandstanding that constantly takes place
through the financial media and to constructively address and remedy systemic problems that have placed
the financial markets in jeopardy.

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CuDECO SHAREHOLDER RESEARCH

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