CuDECO SHAREHOLDER RESEARCH

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

7.4 A Review of Lynas Trading Based on Iress Broker Data







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)
7.3 ASX 200 Company Research Billabong Broker Data (BBG)
7.4 ASX 200 Company Research Lynas Broker Data (LYC)


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INTRODUCTION

Financial markets have radically transformed from the people based open outcry auction systems of
yesteryear into the highly computerized automated platforms that exist today.
There have been many innovations to the way markets operate that have been implemented over recent
decades, usually as a result of the successful lobbying of the US congress and regulatory authorities by the
powerful investment banks. After implementation on Wall Street, changes seem to be exported to stock
exchanges around the globe where they are accepted mostly without question.
Some of the major changes include:
trading and broker services by investment banks;
nominee account structures;
computerized trading;
all investors being able to gain access to the electronic trading platforms hosted by the large banks;
decimalization of pricing levels;
the separation of the functions of broker trading and broker settlements;
short selling & securities lending;
broker anonymity in daily trading;
a continual drive for electronic trading in new and exotic financial products including CFDs;
warrants, options, derivatives, futures etc.;
index investing;
various types of crossings introduced;
automated trading algorithms; and,
electronic Dark Pool venues.
It is fair to say that sophisticated investors, led by the investment banks, have pushed for many of the changes,
embraced the changes and taken advantage of them to increase their level of control over the market.
It is also fair to say that the transformations have brought with them a host of concerns that have serious
implications for market integrity. The concerns that have been so far identified and highlighted by
research into broker and registry trading data are listed below:
Markets now represent an unfair playing field because of licensing concessions that enable
sophisticated investors to trade with a strategic advantage over all other participants.
Non-transparency issues surround most trading taking place irrespective of whether trading is in
the lit market, in dark pools or in other dark exchanges that occur off-market.
Securities lending plays a dominant role in modern markets to the extent that the management and
containment of exposed positions represent a significant influence over daily trading.
Short selling is being widely used as a manipulative trading tool to force prices lower, with
subsequent short covering organized in such a way as to avoid price discovery. The result is that
sophisticated investors are able to profit at the expense of investors with funds under management
whose shares are loaned out to faciliate the settlement of short sales.
The extent of anonymity afforded to sophisticated investors by the system of trading and
settlements allows entities to trade with minimal accountability for the impact their trading has on
the market.
4

Managed funds (including compulsory superannuation contributions) are extremely susceptible to
abuse because of:
o the over trading of accounts in pursuit of increased commissions, fees and charges;
o the sacrificing of portfolios under management by the lending of shares to industry
associates to facilitate their short selling activities;
o The misuse of funds in support of private/corporate trading agendas;
High levels of back and forth trading churn by sophisticated investors is the single most prominent
feature of trading with entities likely to be using multiple algorithms via multiple brokers to
distribute their buying and selling across the entire market. The activity is overtly manipulative and
in the current regulatory envrionment, it enables control over prices (i.e., share price manipulation)
just as long as the activity is kept beneath the metrics used by ASX market surveillance teams to
monitor trading. Trading churn in all its forms means that legalized share price manipulation is the
single biggest issue that needs to be addressed within the current regulatory framework.
The official reporting of daily market activity regarding short positions has been shown to be grossly
unreliable, suggesting that a market that cannot be reliably reported on, cannot be reliably
regulated.
The extent of dark pool and off-market activity raises concerns for both market integrity and
market liquidity. In fact, the full extent of these practices appears not to be widely appreciated or
understood, which raises major regulatory concerns.
Markets are increasingly struggling to be able to provide a fair medium of exchange between
genuine buyers and genuine sellers. Traditional drivers such as efficient market theory,
fundamental value, supply and demand, and significant news events are being replaced by the
trading agendas of the most powerful trading influences in the market and delivered through their
trading algorithms.
The vast majority of trading takes place under the 5% reporting threshold for substantial
shareholder disclosures, and this means that most corporate activity takes place completely
opaque to the market. It further adds to the difficulties in effectively regulating the market. So too
does the wide range of reporting styles used for substantial shareholder disclosures, with much of
the information difficult to audit and in some cases difficult to even read. It makes interpreting
what has taken place with trading extremely onerous and somewhat problematical.
The combination of issues means that there is an enormous scope for trading to be heavily compromised
and for prices to be managed wherever it is deemed necessary by the trading agendas of sophisticated
investors. And if done incrementally and kept under the radar of daily market surveillance protocols and
substantial shareholder reporting requirements there is every chance that trading might be regarded as
not fair, not orderly and most definitely opaque, particularly as detailed audits provide the only way of
understanding what is actually occurring with trading. Of course audits are rarely, if ever, implemented.
These observations relating to unfair markets would be readily supported by the large numbers of retail
investors who have deserted the market because of heavy losses sustained in what is now widely
acknowledged as an un-level playing field. The observations would also resonate amongst the large number of
investors who have had to put off retirement plans because of the large devaluations in their portfolios in
recent years.

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The concerns articulated above need to be considered along with the sort of statements often made in
regulatory advice such as It is necessary to maintain fair, orderly and transparent equity markets. In view
of the dubious data trends that persistently show up in trading data, such statements reveal the bandaid
approach adopted and a tendency to generate headlines without effective follow up and effective action.
Regulators face a difficult task as the procedures and trading guidelines currently in place obviously
provide safe passage to a number of manipulative behaviours. Prosecutions are rare events mainly
because it is difficult to mount legal cases that would stand up in court given the flexibilities within the
system. Yet if the behaviours are able to deliver artificial pricing levels then the situation amounts to one of
legalized or sanctioned share price manipulation.
Perhaps the biggest failure of the regulator is in not identifying the sort of trading behaviours and system
shortfalls highlighted by research as breaching commonly held notions of fair trading, even if these are not
articulated as such within the current trading guidelines. Its charter also requires it to report to Treasury
any matters that put the Australian financial system at risk. The extent of problems enveloping the
financial markets since the GFC because of manipulative trading behaviours (including the abusive use of
short selling) is testimony to what might be considered as a gross dereliction of duty. The situation is made
even more acute as there is evidence to suggest that the regulator has been made aware of issues over a
considerable period of time. Yet nothing has been done as the problems persist and the trading behaviours
are still creating issues that strike at the heart of market integrity.
The issue of legality is very much put into focus by the following quotation by Martin Luther King:
We should never forget that everything Adolf Hitler did in Germany was legal and everything the
Hungarian freedom fighters did in Hungary was "illegal."
Martin Luther King, Jr., "Letter from Birmingham Jail," Why We Cant Wait, 1963

Finally, many of the changes to the way markets operate over recent decades have generally been
designed and introduced into the financial markets at the urging, lobbying and insistence of the worlds
most powerful sophisticated investors, represented by the too big to fail investment banks.
Unfortunately, the same banks were behind the securitization and successful marketing of toxic sub-prime
mortgages that laid the foundations for the Global Financial Crisis. It is also noted that industry
consultation is heavily promoted by the ASX and ASIC when attempting to make changes to trading rules
and requirements. While industry consultation is to be commended, it must also be borne in mind, that
like self-regulation that clearly didnt work, seeking and acting on advice from entities who have a proven
record of manipulating the system to their own ends, and have consistently paid heavy fines for doing so,
is a bit like allowing the foxes to guard the chickens in the hen house. Changes need to be made with the
impact on participants in mind but also in a way that guarantees market integrity irrespective of any
inconvenience caused.

A classic example is the banning of naked short selling which to this day is still able to take place even if it is
meant to be illegal. The requirement of covered short sales certainly hasnt prevented the system from
being rorted with large profits stripped out of the market by sophisticated investors at the expense of
investors, companies and indeed the markets reputation itself.
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OVERVIEW
Potentially manipulative trading activity that takes place on the ASX as noted in Research Paper 7.3 Section
7.3.1.6 is further brought to attention in the current Paper through the disclosures provided by substantial
shareholder notices lodged in respect of Lynas Corporation. The approach has been to contrast the share
movements associated with substantial shareholders, as disclosed on particular days, against IRESS broker
records of trading on the same days.
Notices relating to a Substantial Shareholder Group being affiliated with an ASX broker (referred to as the
House Broker) have provided insights into trading whereby many of the trading activities might qualify as
behaviours that could have resulted in the setting of artificial pricing levels. Recently, the decision handed
down by the Australian High Court where seven judges unanimously agreed that buying or selling shares
on the share market to create or maintain a share price should be considered market manipulation under
the Corporations Act <LINK> may also mean that much of the trading activity identified by research
potentially qualifies as market manipulation under the Corporations Act.
The extent of anomalies in trading data suggests that prior to the court decision, all manner of suspicious
behaviours have been sanctioned because of the uncertainty about how entities could be successfully
prosecuted in court. The clear cut High Court decision now removes a lot of that uncertainty.
Research has continuously presented issues that have serious implications for the integrity of the market
and which require urgent attention. A market cannot be regarded as having integrity if trading cannot be
adequately monitored, nor can it have integrity if entities are not able to be readily identified and held
accountable for their trading actions. Yet that is the situation that currently exists.
Responsible for the current malaise are the widespread use of trading algorithms and the overwhelming
extent of trading activity that is opaque to the market. Also at the core of problems are the use of short
selling and securities lending as a manipulative trading tool, along with the high level of collusion that takes
place by brokers and/or fund managers. The net effect is to compromise and overwhelm the market where
the major influences are all but invisible to participants and regulators.
The majority of trading takes place invisibly to the market because:
the trading and settlement system enables obfuscation and anonymity to surround a majority of
the trading undertaken by sophisticated investors;
levels of ownership are kept under 5% of the register thereby avoiding disclosure rules;
changes to substantial holdings are kept under the 1% compulsory reporting limit and so also avoid
having to be disclosed; and
o many substantial holders lack a House Broker and so use multiple brokers who are unable to
be identified other than through audits; and
o even substantial holders identifiable with a House Broker dont necessarily use the House
Broker for all of their trading activity.
Camouflage, confusion and invisibility may provide markets with a degree of flexibility and freedom, but
they can also enable dubious activity to flourish without fear of detection. The current situation should be
of enormous concern for not only the market regulator, but also for Treasury since the robust functioning
of financial markets, where market integrity is a given and strenuously guaranteed, is so important in being
able to build and sustain a vibrant economy. The fact that even the regulator doesnt seem to be able to
comprehend
1
the impact trading algorithms and dark pools have in facilitating artificial pricing levels is of
equal concern. It means that we have a situation where the regulator itself is fumbling around in the dark
to look for breaches of trading that also occur in the dark.

1
Refer: ASIC refines dark liquidity, high-frequency trading rules
Comment by journalist Karina. Barrymore, Herald Sun Jun 22, 2013: Our fearless investment watch dog, the
Australian Securities and Investment Commission this week officially backed off doing anything more to halt, control or
even try and limit the large number of share deals being done in so called dark pools or secret transactions

7

Behaviours identified that may qualify as market manipulation and which dont appear to have been
regulated in line with the directions handed down by the recent High Court judgement include:
orders by entities, or by entities who happen to share common trading objectives, exercising control
over the market through the distribution of buying and selling across a wide network of brokers, all
transacted in small parcel sizes by algorithms, where the end result is that the market can be
overwhelmed in their collective favour.
the spreading of substantial holdings across multiple accounts that are lodged with multiple
institutions, thus enabling buying and selling to be spread across a broad network, even though the
activity effectively relates to the dealings of a single interest.

Importantly, a substantial entity selling while an affiliate is buying, even though the shares are washed
through other brokers via multiple small transactions, eventually delivers the same result as if the two
entities were to deal directly with each other. However, dealing directly with each other represents an
illegal wash trade because there is no beneficial change to ownership involved. If the trading outlined
avoids being classified as a wash trade then it might qualify as trading that is motivated by a desire to
control the market through the creation of an artificial trading environment. Certainly entities buying
and selling amongst themselves, over and over, must certainly be viewed with high levels of suspicion.

Furthermore, an entity acting from a single account can also be buying and selling through multiple
brokers for no net-change to the holding and also qualify as activity that might be in support of creating
an artificial price. In the absence of trading algorithms such behaviours would be much more easily
spotted and no doubt dealt with as unfairly influencing the market.
high levels of churn being supplied to the market by brokers acting in support of the major transactions
being processed by other brokers. Such co-operation may be informal and done on a favour-by-favour
basis or may be through affiliations and networks that exist within the industry. However the activity
nevertheless represents collusion and strongly identifies with attempts to create artificial pricing levels.
substantial holders using multiple brokers in conjunction with a House broker to control market
outcomes whereby the House Broker may be either supporting the trading objectives given to other
brokers or even trading in opposition to those objectives possibly through insider knowledge.
Securities Lending and Short Selling being used to manipulatively engineer successful trading
outcomes. Short selling has emerged as a dominant force in the market with large exposures likely to
be responsible for setting artificial prices, to either manage risk, or to ensure that winning trades are
able to be consummated. The practice of short selling on-market (with severe price impact) and the
covering of exposures off-market (without price impact) is completely contradictory to expectations of
what fair trading ought to be about.
The tendency of brokers to influence pricing levels through control over Down Ticks, but where their
involvement with selling generally has been relatively minor, also strongly identifies with attempts to
maintain artificial pricing levels. Such activity has been shown to be a regular feature of trading and
suggests that nondescript brokers often help to set the pricing levels from which major transactions
are put through the market.

All trading behaviours are demonstrated/suggested by the research undertaken regarding Lynas
Corporation substantial shareholder notices, although accurate assessments would require the
thorough auditing of broker and client accounts. The material published on the blog, in conjunction
with the recent High Court Decision, does provide enormous impetus for a complete re-think of the
way markets are allowed to operate and the way in which market regulation is conducted.

The bottom line is that for each day that passes where nothing is done, enormous levels of shareholder
wealth is being destroyed through possibly unscrupulous trading behaviours. The situation is amply
demonstrated by the 33% slump in the Lynas share price in June 2013 for reasons unrelated to the
operational strength of the company, and for that matter, by the 47% slump in the share price of
CuDeco, when operationally the company has never been stronger.
8


CONTENTS



Section 1 ......Pg. 9
7.4.1 BACKGROUND INFORMATION MARKET MANIPULATION

Section 2 ........... Pg. 13
7.4.2 A REVIEW OF LYNAS CORPORATION LTD TRADING DATA

Section 3 ....Pg. 29
7.4.3 SUBSTANTIAL SHAREHOLDER DISCLOSURES IN RELATION TO LYNAS CORPORATION


7.4.3.1 MITSUBISHI UFJ FINANCIAL GROUP . Pg. 29

7.4.3.2 JP MORGAN CHASE & CO AND ITS AFFILIATES . Pg. 32

7.4.3.3 MORGAN STANLEY INVESTMENT MANAGEMENT INC. Pg. 59

7.4.3.4 MERRILL LYNCH & CO INC. Pg. 77

7.4.3.5 DOWN TICK AND UP TICK CONSIDERATIONS .. Pg. 84

7.4.3.6 SUMMARY OF TRADING BEHAVIOURS Pg. 91


9



Section 7.4.1
BACKGROUND INFORMATION

Re: MARKET MANIPULATION

Share market manipulation is acknowledged and addressed both by the Australian Stock Exchange (ASX)
and the Australian Securities and Investments Commission (ASIC) and is also covered under the
Corporations Act. The research undertaken contrasts trading behaviours in actual trading and registry data
in conflict with the published guidelines regarding market manipulation.
The research data suggests that there is a vast amount of trading taking place that deserves much closer
scrutiny by market regulators.
The issue of share price manipulation, and in particular, trading behaviours that lead to artificial pricing
levels, have been brought further into focus by a recent High Court ruling on the matter. The decision was
a timely reminder that share price manipulation is illegal and can be successfully prosecuted.

10

7.4.1.1 ASX INFORMATION CONCERNING SHARE PRICE MANIPULATION
The ASX has previously published information concerning share price manipulation on its website with the
summary below noted in April 2009 from the following link.
http://www.asx.com.au/supervision/participants/market_manipulation.htm

<Extract>
Market manipulation describes a deliberate attempt to interfere with the free and fair operation of the
market and create artificial, false or misleading appearances with respect to the price of, or market for, a
stock. This is typically done either by spreading false or misleading information in order to influence others
to trade in a particular way, or by using buying and selling orders deliberately to affect prices or turnover,
in order to create an opportunity for profit.

Examples of market manipulation for which ASX Markets Supervision monitors include:
Price manipulation
Placing buy or sell orders (or both) into the market in order to change or maintain the price of a stock. The
motives for attempting to do so might include:
To increase the value of a position in the stock for accounting or portfolio valuation purposes;
To be able to issue new shares at a higher price; or
To cause such a price rise that other investors are attracted to the stock, creating additional
demand and higher prices that the manipulator can sell into.
Marking the close
Marking the close involves buying or selling a stock near the close of the day's trading, with the objective
of affecting the closing price. This might be done to avoid margin calls (when the trader's position is not
self-financed), to help stymie a takeover or rights issue, to support a flagging price or to affect the
valuation of a fund managers portfolio at the end of a quarter (called "window dressing"). A common
indicator is trading in small parcels of the security just before the market closes, which results in a higher
closing price.

Wash trades and pre-arranged trading
A wash trade is a trade in which there is no change in the beneficial ownership of the securities - the buyer
is either also the seller or is associated with the seller. A pre-arranged trade involves two parties trading on
the basis that the transaction will be reversed later, or under an arrangement that removes the risk of
ownership from the buyer. "Pooling or churning" can involve wash sales or pre-arranged trades executed
in order to give an impression of active trading, and therefore investor interest in the stock.

False or misleading information
Companies and investors might be tempted to re-release information or present information in an over-
optimistic manner, in order to generate interest in the companys securities or help a flagging stock price.
In some cases this includes unrealistic, unsubstantiated or incorrect data, projections or evaluations and
takeover rumours. Unscrupulous investors may also generate interest in a stock by way of internet
chat rooms or other mechanisms to affect the price of shares. When the perpetrators use the demand
generated by the false information they have spread to sell their own shares, the operation is known as
"hype and dump".


11

Capping and pegging
This involves activity on both the stock market and the derivatives market. A trader writes an option, which
obliges the trader to sell to (in the case of a call option) or buy from (in the case of a put option) the option
holder a specified number of shares at a specified price. The trader then trades in the shares covered by
the option in order to affect the share price in a direction that will make the option unprofitable to
exercise.

Mini-manipulation
This is similar to "capping and pegging", and refers to short term manipulation of the price of a security in
order to profit from options.

Warehousing
Sometimes securities are "warehoused" or "parked" in the name of one person or company with an
arrangement to sell to, or vote at the direction of, another person or company. This may breach the
Corporations Act or ASX Listing Rules.

Unfortunately, the ASX link is no longer active and the information no longer appears to be available. It
certainly isnt available in the form that it was previously provided. Even when the search option on the
current ASX website is used, and the headings used in the above summary are searched for, it still does not
provide much clarity about share price manipulation issues.
The fact that the information has been removed may be an oversight, or it may even be a tacit admission
that with the advent of trading algorithms, what plays out with trading on a day-by-day basis very closely
resembles some of the trading behaviours that have previously referred to as being manipulative; but the
problems are so large that nothing can be done about them? The information may also have been
removed from the ASX website because ASIC took over market supervisory duties in 2010. Perhaps the ASX
have left it to the newly appointed market regulator to look after all issues relating to market
manipulation?
In any cases the above descriptions for Price Manipulation, Wash Trades and Marking the Close still stand
as manipulative activity. Research has produced copious amounts of data supporting the wide-scale use of
all three activities to unfairly control share prices, with control surreptitiously delivered through the
extensive use of trading algorithms by sophisticated investors.
If market manipulation and the methods used to achieve unfair advantage in the market are no longer an
issue for the ASX, or for that matter ASIC, at least investors need to be informed of the situation so that
they can make appropriate assessments as to the suitability of the market as a means of investing and
planning for the future. There is also the related issue of compulsory superannuation, where the money of
Australian workers is forced into severely compromised markets, more for the benefit of sophisticated
investors and the funds management industry as a whole, than the future retirement plans of workers.
The research into trading data based on Lynas Corporation substantial shareholder declarations provides
an excellent case study of how trading behaviours that have been regarded as manipulative are seemingly
accepted in todays markets almost without question. It should however be noted that suspicions raised by
research can only be properly clarified through the auditing of accounts to determine if any trading
practices and trading relationships between leading entities have damaged the integrity of the Lynas
market.

12

A MAJOR DEVELOPMENT CONCERNING SHARE PRICE MANIPULATION
7.4.1.2 THE RECENT FEDERAL COURT JUDGEMENT
The previous commentary concerning market manipulation in Section 7.4.1.2 needs to be viewed in light of
a very recent judgment passed down by the Australian High Court. The judgment effectively declares that
trading activity that creates an artificial share price is illegal under the Corporations Act. This judgement is
likely to have major ramifications for the type of trading brought to attention by shareholder research. The
article was published in the Australian Financial Review (AFR) on June 28, 2013 and is reproduced below.
High Court Rules on Share Price Rigging (AFR - 28 Jun 2013)
LINK: http://www.afr.com/p/national/high_court_rules_on_share_price_YoOPohUZUVhmA0SWJXjbbN
The High Court has ruled that buying or selling shares on the share market to create or maintain a share
price should be considered market manipulation under the Corporations Act.
The unanimous ruling on the definition of maintaining an artificial price gives the Australian Securities
and Investments Commission a powerful new weapon to use against people who trade shares to
deliberately influence trading on the Australian Securities Exchange, legal experts said.
That really expands the concept of market manipulation significantly, said Robert Austin, a Minter Ellison
consultant and former NSW Supreme Court judge. It gives ASIC a powerful tool as the principle market
regulator.
The Commonwealth Director of Public Prosecutions had appealed from the Victorian Court of Appeal over
an unnamed person on 39 counts of market manipulation.
JM, as he is called in the judgment, is alleged to have had his daughter make trades in a listed companys
shares in 2006 to keep its price at or above 35. JM had bought a large number of shares in the company
using a margin loan. If the share price fell below 35, he would have been subject to a margin call forced
to deposit more collateral by his broker.
The artificial price rule was originally introduced in 1986 to deal with manipulation of the futures market.
Legal meaning of artificial price
Before the trial jury was empanelled, Victorian Supreme Court judge Justice Mark Weinberg asked the Court
of Appeal to decide the legal meaning of artificial price. It ruled that it referred specifically to cornering
and squeezing, US terms related to the futures market.
These refer to the creation of artificial derivatives prices by manipulating supply and demand of the
physical commodities deliverable under futures contracts.
The High Court found the definition is not confined to those circumstances and applies to shares and
derivatives.
This provision first came in in the Futures Industries Act 1986. As the law was developed, the futures
legislation was folded in to the Corporations Act. It was still sitting there, but people thought it was limited
in the way it was applied, Mr Austin said.
Professor Ian Ramsay, director of the Centre for Corporate Law and Securities Regulation at the University
of Melbourne, said the decision should reinforce ASICs power to protect the integrity of the market.
I think it is not just a broader definition of market manipulation, he said. You dont need to actually show
you did actually create or maintain an artificial price, just that the buyer or seller set the price with a sole or
dominant purpose of setting an artificial price.

ASIC QUOTE: A person who buys or sells shares for the sole or dominant purpose of creating a particular
price, creates an artificial price for those shares and may be manipulating the market and breaking the law.

13




Section 7.4.2
A REVIEW OF LYNAS CORPORATION LTD TRADING DATA
(ASX CODE: LYC)
14

7.4.2.1.1 INTRODUCTORY COMMENTS ABOUT TRADING:

Trading in Lynas Corporation over the 3 year 4 month period from January 2010 to April 2013 resulted in
around 21.66 billion shares trading. It represents a very large number of transactions to monitor, and while
authorities lay claim to transparent markets, the only level of transparency that exists in the market is that
associated with smaller private companies and retail investors. At least their transactions are transparent
to anyone with access to both broker trading data and the register, where it is possible to reconcile their
trading in the market to their listed holdings. All other trading represents the activity of sophisticated
investors which for the most part is completely opaque to the market.
The opaqueness arises partly through entities using the trading algorithms of multiple brokers for their
buying and selling with large orders broken into small parcel sizes and executed over time in bit by bit,
back and forth trading. Large numbers of transactions often do not impact the register because buying
and selling orders tend to net out, if not on a daily basis then certainly within the T plus 3 settlement
timeframe.
There is also the issue of entities potentially buying through one broker while selling through another (or
others), with the sales representing a sell-down of a holding, or even intra-day short sales that are covered
through purchases through another broker. The result is that often despite large volumes of buying and
selling taking place, changes to beneficial ownership can be relatively minor. Such trading is sanctioned as
a trait of modern markets because of the impact of high speed trading, but such arguments forget that a
lot of the trading is loss-making or marginally profitable, with other agendas presumably being serviced by
the trading activity. Agendas are more likely to represent control over pricing levels than genuine trading
with a proper understanding only likely to be obtained through the extensive auditing of dubious accounts.
Opaque trading is another situation facilitated by entities splitting their holdings across multiple nominee
affiliates, and then lodging them across multiple custodians who are usually represented by the investment
banks.
Adding to the blanket of camouflage surrounding trading is the fact that the investment banks hold shares
for a number of major shareholders that can also be split into multiple holdings and registered with
different custodians.
The Individual daily changes to the holding of a sophisticated investor are therefore often indecipherable
from the bulk changes reported by institutional holdings. And the bulk changes reported by institutional
holdings make no reference to the brokers responsible for the buying and selling in the market. The result
is that reconciling the trading of sophisticated investors is just not possible without the auditing of
accounts or without a complete overhaul of current reporting systems.
Importantly, the situation is diametrically opposed to legislative requirements that call for fair, orderly and
transparent equity markets. It also casts a large dark cloud over market integrity.
Broker activity on behalf of sophisticated investors appears to be a case of providing highly sophisticated
algorithms with the trading parameters needed to achieve specific trading objectives and then placing
them into the market. The programs then execute anonymously, logically, unobtrusively and mostly in
compliance with the sort of trading protocols monitored by ASX market surveillance. As such, this program
trading generally doesnt attract any regulatory concerns whatsoever; so that share price manipulation can
readily take place providing it is kept under the radar. A case in point was highlighted with Link Energy in
15

Research Paper 7.2 Section 7.2.1.3 where a price query was raised only after the share price had fallen 46%
from $1.10 over a 13 day period.
Industry-based arguments used to support trading algorithms and trading anonymity include:
Entities are able to accumulate shares without sellers becoming aware of a strong buying presence
and thereby withdrawing from the market to force prices higher, and;
Entities are able to off-load shares without alerting buyers that there is a seller in the market
whereby they may withdraw to encourage sales at cheaper prices.
It is argued that a certain amount of price stability can be expected from the adding and withdrawing of
substantial positions in the market through the small anonymous parcel sizes offered by trading
algorithms. However anonymity and trading algorithms also provide the opportunity for share price
manipulation to take place on a grand scale and for the most part under the watch of regulators and
market surveillance teams. Trading issues are generally unable to be detected mainly because forensic
auditing of accounts does not appear to be part of the regulatory response to anomalous trading data.
An example of regulatory ambivalence is highlighted by a share price spike on Oct 18, 2012 where the
sharp increase in a number of stocks and in the ASX 200 Futures Index was attributed to actions taken by
broker UBS. To this day there have been no announcements as to the legality or otherwise of trading
undertaken by UBS despite the regulator adopting a high profile in the media when the trading spike
occurred.
7.4.2.1.2 SOPHISTICATED INVESTORS AND TRADING ALGORITHMS
Broker involvement in tick-by-tick trading has now mostly been supplanted by the use of automated
trading algorithms that are exclusively used by sophisticated investors. Sophisticated investors are, as a
group, by far the most dominant sector of the market.
In most respects the trading by sophisticated investors is associated with:
The Investment Banks where their holdings are held and/or managed under guardianship/custodial
rights, and where holdings are made available to underpin an extensive securities-lending industry.
This industry has spawned a raft of products such as CFDs, warrants, options, derivatives etc. etc.
and it also facilitates short selling through the lending of stock;
Trading by Investment Banks on their own account, as well as trading by fund managers with
authority to manage the accounts of large shareholders, pooled funds, super funds and the like, all
of which are generally lodged within institutional holdings for management and safe keeping;
Trading by the large brokers who mainly service institutional buying and selling on behalf of fund
managers, large clients and even hedge funds, but also trade through their own House Accounts.
The overriding feature of trading by sophisticated investors is their reliance on the proprietary trading
algorithms of institutional brokers. The complexity of algorithmic design and how they actually deliver a
competitive advantage to those that use them is likely to be beyond the comprehension of all market
participants. Certainly the worlds most powerful investment banks have poured enormous resources into
recruiting and supporting some of the sharpest mathematical/statistical minds in the world to develop and
fine tune their proprietary algorithms. By their very design they represent a manipulative influence in the
market that advantages one group of investors (sophisticated investors) over another (retail investors).
While the algorithms themselves are not properly understood, their impact over trading is readily
noticeable through the data outcomes they generate.
Algorithms have a propensity to disguise and confuse trading in such a way that it is difficult to monitor
tick-by-tick trading as all trades appear innocuous. But the reality is that all trades are designed to deliver a
16

strategic advantage, even the plethora of small trades for 1 or more shares that make no sense to retail
investors. A major function of trading algorithms appears to be to disguise trading agendas by recycling
shares through the market. Often a large seller or sellers are able to offload large parcels of shares that get
recycled through the market by algorithms buying then selling, or selling then buying, over and over until
the shares end up with a major buyer or buyers. Yet at the end of the day often there are only minor
changes to beneficial ownership as the large seller(s) and the large buyer(s) are related to the same
shareholder group.
The activity has the hallmarks of manipulation particularly when the buyers average cost ends up below
what the seller receives. That is, the entire exercise is unprofitable. Such trading is obviously done for
reasons other than generating profits and raises concerns about possible manipulative agendas.
The fact that ASIC have blithely announced that they now see nothing wrong with algorithmic trading after
alerting the public to possible problems with High Frequency Trading over several years, is perhaps
testimony to either:
An allegiance to the sector represented by sophisticated investors. Any such allegiance is to the
detriment of:
o The many small retail investors who look to the market to grow private superannuation and
personal investments, and;
o Australian workers who are forced into a seriously compromised market through
government policy as it relates to compulsory superannuation.
And/Or:
ASICs inability to comprehend and/or measure the impact of algorithms on the market, despite
concerning data anomalies and a welter of protestations from individuals and groups who claim to
have been disadvantaged by them.

The trading data in Lynas Corporation in the sections that follow therefore needs to be viewed in context
with broker anonymity, entities trading through multiple brokers, trading that doesnt result in changes of
ownership, the possibility of entities trading through different brokers but sharing trading objectives
particularly where short selling and stock lending is involved, and most importantly, what the high levels of
trading churn might actually represent, especially where there are doubts about trading being regarded as
fair, genuine and transparent.

17

7.4.2.2.1 LYNAS CORPORATION LTD (LYC) Broker Statistics Accompanying Share Price Trends
The chart tracks the Lynas share price from the beginning of January 2010 through to the end of April
2013, a period that encompasses just over 13 quarters of trading.


To tie in with previous research on Lynas Corporation, open short position movements are again compared
to share price trends below. Official open short positions have been made available since June 16, 2010.




0
50
100
150
200
250
M
i
l
l
i
o
n
s


Trading over 3.3 years has seen 21.66 Billion shares bought and sold while the share price has
essentially remained stagnant over the period at around 50 cents. While 50 cents represents the low
point of the trading range, the shares did trade up to $2.50 in April 2011. The subsequent sell-down
saw institutions reduce their control from 72.5% of the register in 2011 to 56.8% in 2012.
Commnencement of Open
Short Position reporting
June 16, 2010
Period: Jan 2010 to Apri 2013
80% share price
decline
820% open short
incease
$2.50
$1.50
$1.00
$2.00
$2.00
$1.00
18

7.4.2.3.1 PROMINENT BROKERS
In an attempt to identify who the prominent brokers have been in the trading of Lynas Corporation shares,
four secular trends have been identified on the chart below, and broker statistics corresponding to each
trend have been sourced from IRESS data. The results follow.


PERIOD 1: A flat trending share price from Jan 1, 2010 to May 31, 2010 (5 months)
LEADING BROKERS BY MARKET SHARE LEADING BROKERS BY NET BUYING & NET SELLING
BROKER SELLS BUYS NET SHARE % BROKER SELLS BUYS NET BUYS NET %
COMM 147,442,756 133,373,564 -14,069,192 12.5% DMG 105,080,025 138,786,166 33,706,141 26.0%
DMG 105,080,025 138,786,166 33,706,141 10.9% JPM 25,685,569 55,394,912 29,709,343 23.0%
ABNA 104,407,961 104,438,304 30,343 9.3% PSL 28,003,944 46,683,330 18,679,386 14.4%
MACQ 76,945,757 79,314,689 2,368,932 7.0% MSDW 49,964,068 59,681,243 9,717,175 7.5%
ETRD 57,785,913 53,703,937 -4,081,976 5.0% STBG 2,914,406 11,375,411 8,461,005 6.5%
MSDW 49,964,068 59,681,243 9,717,175 4.9% GS 46,265,658 54,561,536 8,295,878 6.4%
GS 46,265,658 54,561,536 8,295,878 4.5% INST 21,340,209 26,389,178 5,048,969 3.9%
CITI 48,404,344 40,876,213 -7,528,131 4.0% MOELIS 0 4,000,000 4,000,000 3.1%
BBY 45,076,376 40,358,814 -4,717,562 3.8% MACQ 76,945,757 79,314,689 2,368,932 1.8%
UBS 50,074,474 33,591,105 -16,483,369 3.7% D2MX 5,297,917 7,249,291 1,951,374 1.5%
JPM 25,685,569 55,394,912 29,709,343 3.6% Other 159,636,991 167,147,606 7,510,615 5.8%
CSUI 46,178,708 34,583,236 -11,595,472 3.6%

Total 129,448,818

PSL 28,003,944 46,683,330 18,679,386 3.3%

Net Selling
AIEX 38,542,182 36,278,445 -2,263,737 3.3% BROKER SELLS BUYS NET SELLS NET %
INST 21,340,209 26,389,178 5,048,969 2.1% STHC 24,655,920 6,480,920 -18,175,000 14.0%
MERL 20,265,363 21,166,366 901,003 1.8% UBS 50,074,474 33,591,105 -16,483,369 12.7%
CIMB 21,042,002 15,339,127 -5,702,875 1.6% EURO 16,005,474 100,000 -15,905,474 12.3%
IMCP 15,546,716 15,076,126 -470,590 1.4% COMM 147,442,756 133,373,564 -14,069,192 10.9%
CLSA 21,175,667 10,286,535 -10,889,132 1.4% CSUI 46,178,708 34,583,236 -11,595,472 9.0%
STHC 24,655,920 6,480,920 -18,175,000 1.4% CLSA 21,175,667 10,286,535 -10,889,132 8.4%
MACP 14,697,190 10,769,196 -3,927,994 1.1% CITI 48,404,344 40,876,213 -7,528,131 5.8%
AUST 12,529,448 9,623,407 -2,906,041 1.0% CIMB 21,042,002 15,339,127 -5,702,875 4.4%
TIMBA 10,208,843 7,916,845 -2,291,998 0.8% BBY 45,076,376 40,358,814 -4,717,562 3.6%
EURO 16,005,474 100,000 -15,905,474 0.7% ETRD 57,785,913 53,703,937 -4,081,976 3.2%
STBG 2,914,406 11,375,411 8,461,005 0.6% MACP 14,697,190 10,769,196 -3,927,994 3.0%
Other 71,566,529 75,656,897 4,090,368 6.3% Other 108,132,134 91,759,493 -16,372,641 12.6%
Totals 1,121,805,502 1,121,805,502 0 100%

Total -129,448,818


Period 1
Period 2
Period 3
Period 4
Shorts: + 40 million
Shorts: + 74 million
Shorts: + 83 million
$1.50
$2.50
19

PERIOD 2: An up-trending share price from June 1, 2010 to March 31, 2011 (10 months)
LEADING BROKERS BY MARKET SHARE LEADING BROKERS BY NET BUYING & NET SELLING
BROKER SELLS BUYS NET SHARE % BROKER SELLS BUYS NET BUYS NET %
COMM 1,509,122,155 1,484,312,472 -24,809,683 27.4% CITI 405,928,322 464,954,444 59,026,122 24.1%
DMG 536,193,750 516,624,332 -19,569,418 8.8% JPM 161,674,527 201,250,000 39,575,473 16.1%
CITI 405,928,322 464,954,444 59,026,122 7.7% UBS 312,841,875 350,004,684 37,162,809 15.2%
ETRD 311,431,141 333,439,022 22,007,881 5.4% CSUI 134,892,057 160,908,793 26,016,736 10.6%
UBS 312,841,875 350,004,684 37,162,809 5.4% ETRD 311,431,141 333,439,022 22,007,881 9.0%
MERL 269,262,865 280,117,567 10,854,702 4.6% INST 71,732,357 87,731,412 15,999,055 6.5%
MSDW 269,337,550 258,170,374 -11,167,176 4.2% MERL 269,262,865 280,117,567 10,854,702 4.4%
MACQ 231,459,379 203,881,125 -27,578,254 3.5% RBC 6,733,338 12,833,395 6,100,057 2.5%
GS 212,140,027 196,242,340 -15,897,687 3.2% DAIW 8,268,367 12,633,245 4,364,878 1.8%
AIEX 196,032,257 195,763,973 -268,284 3.2% WILS 11,960,361 15,558,788 3,598,427 1.5%
JPM 161,674,527 201,250,000 39,575,473 2.9% Other 354,015,874 374,497,980 20,482,106 8.4%
BBY 184,821,272 181,340,212 -3,481,060 2.8%

Total 245,188,246

CSUI 134,892,057 160,908,793 26,016,736 2.5%

Net Selling

HUB24 133,586,030 130,423,833 -3,162,197 2.3% BROKER SELLS BUYS NET SELLS NET %
PSL 145,449,667 83,003,428 -62,446,239 1.9% PSL 145,449,667 83,003,428 -62,446,239 25.5%
INST 71,732,357 87,731,412 15,999,055 1.3% MACQ 231,459,379 203,881,125 -27,578,254 11.2%
SOSL 55,368,567 55,612,899 244,332 0.9% COMM 1,509,122,155 1,484,312,472 -24,809,683 10.1%
MACP 51,606,617 46,658,308 -4,948,309 0.9% DMG 536,193,750 516,624,332 -19,569,418 8.0%
NOM 40,904,959 43,560,445 2,655,486 0.8% GS 212,140,027 196,242,340 -15,897,687 6.5%
FOST 38,994,589 42,590,854 3,596,265 0.7% INV 26,389,500 10,916,440 -15,473,060 6.3%
TPPM 35,976,278 36,331,597 355,319 0.6% BELL 36,963,325 23,692,811 -13,270,514 5.4%
CIMB 40,508,855 30,164,402 -10,344,453 0.6% MSDW 269,337,550 258,170,374 -11,167,176 4.6%
ORDS 33,932,440 37,112,804 3,180,364 0.6% CIMB 40,508,855 30,164,402 -10,344,453 4.2%
ABNA 58,478,303 58,388,303 -90,000 0.5% RBSM 27,691,715 19,458,817 -8,232,898 3.4%
BELL 36,963,325 23,692,811 -13,270,514 0.5% MACP 51,606,617 46,658,308 -4,948,309 2.0%
Other 419,562,939 395,921,669 -23,641,270 6.3% Other 762,598,479 731,147,924 -31,450,555 12.8%
Totals 5,898,202,103 5,898,202,103 0 100%

Total -245,188,246


PERIOD 3: A down-trending share price from April 1, 2011 to September 19, 2011 (Approx. 5.5 months)
LEADING BROKERS BY MARKET SHARE LEADING BROKERS BY NET BUYING & NET SELLING
BROKER SELLS BUYS NET SHARE % BROKER SELLS BUYS NET BUYS NET %
COMM 2,052,816,055 2,068,066,290 15,250,235 39.1% NOM 134,466,708 180,066,610 45,599,902 25.6%
CITI 468,754,670 497,001,046 28,246,376 9.2% CITI 468,754,670 497,001,046 28,246,376 15.8%
DMG 356,378,680 341,698,071 -14,680,609 6.6% ETRD 214,223,921 230,581,677 16,357,756 9.2%
ETRD 214,223,921 230,581,677 16,357,756 4.2% COMM 2,052,816,055 2,068,066,290 15,250,235 8.6%
UBS 225,685,073 188,308,355 -37,376,718 3.9% MACP 34,214,071 45,897,030 11,682,959 6.6%
GS 195,405,806 201,767,676 6,361,870 3.8% CSUI 155,927,475 166,383,412 10,455,937 5.9%
CSUI 155,927,475 166,383,412 10,455,937 3.1% PSL 75,629,079 85,654,993 10,025,914 5.6%
NOM 134,466,708 180,066,610 45,599,902 3.0% AIEX 120,942,325 130,865,552 9,923,227 5.6%
MACQ 157,895,433 137,601,563 -20,293,870 2.8% GS 195,405,806 201,767,676 6,361,870 3.6%
MSDW 161,660,906 117,153,752 -44,507,154 2.6% FWHT 11,458,779 15,611,161 4,152,382 2.3%
AIEX 120,942,325 130,865,552 9,923,227 2.4% Other 386,027,882 406,312,305 20,284,423 11.4%
MERL 116,126,506 119,847,369 3,720,863 2.2%

Total 178,340,981

HUB24 101,239,195 100,630,015 -609,180 1.9%

Net Selling
BBY 103,061,242 93,052,325 -10,008,917 1.9% BROKER SELLS BUYS NET SELLS NET %
JPM 96,131,894 90,360,261 -5,771,633 1.8% MSDW 161,660,906 117,153,752 -44,507,154 25.0%
INST 86,899,578 75,183,276 -11,716,302 1.5% UBS 225,685,073 188,308,355 -37,376,718 21.0%
PSL 75,629,079 85,654,993 10,025,914 1.5% MACQ 157,895,433 137,601,563 -20,293,870 11.4%
SOSL 48,496,696 48,833,417 336,721 0.9% DMG 356,378,680 341,698,071 -14,680,609 8.2%
D2MX 41,902,013 42,293,014 391,001 0.8% INST 86,899,578 75,183,276 -11,716,302 6.6%
MACP 34,214,071 45,897,030 11,682,959 0.8% BBY 103,061,242 93,052,325 -10,008,917 5.6%
FOST 38,932,260 39,136,483 204,223 0.7% ITG 15,685,714 8,333,440 -7,352,274 4.1%
CIMB 23,889,179 25,477,379 1,588,200 0.5% STHC 18,965,892 11,957,276 -7,008,616 3.9%
TPPM 23,239,485 24,488,052 1,248,567 0.5% JPM 96,131,894 90,360,261 -5,771,633 3.2%
STHC 18,965,892 11,957,276 -7,008,616 0.3% CLSA 16,012,133 11,074,935 -4,937,198 2.8%
SUSQ 14,590,943 15,193,766 602,823 0.3% EVAN 4,888,040 2,394,664 -2,493,376 1.4%
Other 208,675,208 198,651,633 -10,023,575 3.9% Other 183,018,937 170,824,623 -12,194,314 6.8%
Totals 5,276,150,293 5,276,150,293 0 100%

-178,340,981

20

PERIOD 4: A down trending share price from Feb 1, 2012 to April 24, 2013 (Approx. 15 months)
LEADING BROKERS BY MARKET SHARE LEADING BROKERS BY NET BUYING & NET SELLING
BROKER SELLS BUYS NET SHARE % BROKER SELLS BUYS NET BUYS NET %
COMM 1,518,340,591 1,725,755,913 207,415,322 26.3% COMM 1,518,340,591 1,725,755,913 207,415,322 42.6%
CITI 655,904,847 683,805,023 27,900,176 10.9% ETRD 379,373,043 458,504,000 79,130,957 16.3%
ETRD 379,373,043 458,504,000 79,130,957 6.8% AIEX 193,399,939 234,618,746 41,218,807 8.5%
GS 412,162,004 328,314,664 -83,847,340 6.0% CITI 655,904,847 683,805,023 27,900,176 5.7%
UBS 361,204,802 343,151,006 -18,053,796 5.7% RBSM 24,435,707 50,217,388 25,781,681 5.3%
DMG 349,984,627 316,964,501 -33,020,126 5.4% WEALTH 17,115,793 31,152,915 14,037,122 2.9%
MACQ 238,800,268 240,090,956 1,290,688 3.9% MACP 47,508,731 60,150,404 12,641,673 2.6%
MSDW 287,121,657 185,020,743 -102,100,914 3.8% PERS 47,678,487 59,711,926 12,033,439 2.5%
AIEX 193,399,939 234,618,746 41,218,807 3.5% ITG 15,216,067 23,502,493 8,286,426 1.7%
CSUI 208,827,906 207,336,360 -1,491,546 3.4% PSL 97,245,205 105,448,859 8,203,654 1.7%
BBY 153,055,942 152,796,283 -259,659 2.5% Other 685,313,523 735,166,879 49,853,356 10.2%
JPM 195,778,753 74,561,237 -121,217,516 2.2%


Total 486,502,613

VIRT 131,861,510 115,170,875 -16,690,635 2.0%

Net Selling
PSL 97,245,205 105,448,859 8,203,654 1.6% BROKER SELLS BUYS NET SELLS NET %
SOSL 89,998,674 95,067,215 5,068,541 1.5% JPM 195,778,753 74,561,237 -121,217,516 24.9%
MERL 79,718,439 58,923,157 -20,795,282 1.1% MSDW 287,121,657 185,020,743 -102,100,914 21.0%
MACP 47,508,731 60,150,404 12,641,673 0.9% GS 412,162,004 328,314,664 -83,847,340 17.2%
PERS 47,678,487 59,711,926 12,033,439 0.9% DMG 349,984,627 316,964,501 -33,020,126 6.8%
D2MX 48,343,807 48,825,957 482,150 0.8% MERL 79,718,439 58,923,157 -20,795,282 4.3%
SUSQ 43,347,394 43,876,227 528,833 0.7% CLSA 30,470,066 9,908,353 -20,561,713 4.2%
INST 41,782,060 39,188,568 -2,593,492 0.7% UBS 361,204,802 343,151,006 -18,053,796 3.7%
NOM 45,430,835 35,303,508 -10,127,327 0.7% RBC 18,696,374 1,770,636 -16,925,738 3.5%
MORR 39,497,569 39,676,747 179,178 0.6% VIRT 131,861,510 115,170,875 -16,690,635 3.4%
CMCS 34,620,191 41,595,336 6,975,145 0.6% NOM 45,430,835 35,303,508 -10,127,327 2.1%
CIMB 41,294,609 34,271,427 -7,023,182 0.6% GETCO 21,291,611 11,692,670 -9,598,941 2.0%
Other 424,213,421 438,365,673 14,152,252 7.0% Other 551,242,700 517,679,415 -33,563,285 6.9%
Totals 6,166,154,720 6,166,739,398 0 100%


Total -486,502,613


7.4.2.3.2 COMMENTS: Periods 1 & 2
Commonwealth Securities are seen to be by far the most influential broker in trading Lynas shares. They
stepped up from a 12.5% market share (and being net seller) when the share price was flat (Period 1) to a
27.4% market share when the share price was trending upwards mid 2010 (Period 2). It was however
Citigroup, JPM and UBS who were the major net buyers through Period 2 with Patersons the major net
seller along with Macquarie and Commonwealth. COMM were net sellers across both periods. Open
shorts also increased by around 40 million shares during Period 2, and the share price coming off a low
base, climbed 318%.

The corporate brokers (CITI, JPM and UBS) appear to have accumulated the shares sold short by their
affiliates. It is a reasonable assumption that retail investors wouldnt have been selling on flat prices or price
rises which suggests that a heavy institutional presence was operating through Commonwealth Securities.


BROKER SELLS BUYS NET SHARE %

Leading Net Buyers Leading Net Sellers
P
e
r
i
o
d

1

COMM 147,442,756 133,373,564 -14,069,192 12.5%

DMG 33,706,141

STHC -18,175,000
DMG 105,080,025 138,786,166 33,706,141 10.9%

JPM 29,709,343

UBS -16,483,369
ABNA 104,407,961 104,438,304 30,343 9.3%

PSL 18,679,386

EURO -15,905,474
P
e
r
i
o
d

2

COMM 1,509,122,155 1,484,312,472 -24,809,683 27.4%

CITI 59,026,122

PSL -62,446,239
DMG 536,193,750 516,624,332 -19,569,418 8.8%

JPM 39,575,473

MACQ -27,578,254
CITI 405,928,322 464,954,444 59,026,122 7.7%

UBS 37,162,809

COMM -24,809,683
P
e
r
i
o
d

3

COMM 2,052,816,055 2,068,066,290 15,250,235 39.1%

NOMURA 45,599,902

MSDW -44,507,154
CITI 468,754,670 497,001,046 28,246,376 9.20%

CITI 28,246,376

UBS -37,376,718
DMG 356,378,680 341,698,071 -14,680,609 6.60%

ETRD 16,357,756

MACQ -20,293,870
P
e
r
i
o
d

4

COMM 1,518,340,591 1,725,755,913 207,415,322 26.3%

COMM 207,415,322

JPM -121,217,516
CITI 655,904,847 683,805,023 27,900,176 10.90%

ETRD 79,130,957

MSDW -102,100,914
ETRD 379,373,043 458,504,000 79,130,957 6.80%

AIEX 41,218,807

GS -83,847,340
21

Period 3:
The market share of Commonwealth Securities lept to 39% in the decline that followed Period 2 with
COMM trading showing a net purchasing bias although not in the Top 3 net buyers. It represented a
marked change from their net selling through the two previous periods. Again the buying is unlikely to
have been just retail investors who are usually driven by emotions and wrong footed by sharp market
swings. The share price collapsed 58% during Period 3 which saw Nomura and Citigroup as the major net
buyers, while Morgan Stanley, UBS and Macquarie were heavy net sellers.
The end of Period 3 coincides with the release of the 2011 Annual Report and a Top 20 Shareholder list. A
comparison between the 2010 Annual Report Top 20 and the 2011 Top 20 is provided.

LYC Top 20
SHAREHOLDERS
2010
Sept 24
2011
Sept 21
NET Change
HSBC Nominees 490,388,518 480,053,780 -10,334,738
J P Morgan 305,629,758 427,541,736 121,911,978
Citicorp Nominees 118,604,930 89,145,387 -29,459,543
National Nominees 86,984,325 149,382,705 62,398,380
ANZ Nominees 73,770,494 - -73,770,494
Woodross Nominees 50,474,832 - -50,474,832
Merrill Lynch Noms 20,656,771 4,252,292 -16,404,479
Credit Suisse Europe 11,910,000 - -11,910,000
UBS Nominees 9,834,609 - -9,834,609
Equity Trustees Ltd 8,438,618 - -8,438,618
ABN Amro Nominees - 8,129,264 8,129,264
AMP Life 9,809,595 8,793,180 -1,016,415
Cogent Nominees - 4,557,513 4,557,513
QLD Invest Corp - 5,235,314 5,235,314
Totals 1,186,502,450 1,177,091,171 -9,411,279

Broker trading data closely corresponding to the 2010 and the 2011 Annual Reports was as follows .
BROKER SELLS BUYS NET % Share BROKER SELLS BUYS NET BUYS NET %
COMM 3,532,664,457 3,552,215,854 19,551,397 34.9% CITI 841,191,822 926,667,966 85,476,144 26.3%
CITI 841,191,822 926,667,966 85,476,144 8.6% NAL 182,916,945 226,722,190 43,805,245 13.5%
DMG 815,301,721 771,278,161 -44,023,560 7.4% ETRD 477,382,778 513,311,288 35,928,510 11.0%
ETRD 477,382,778 513,311,288 35,928,510 4.7% COMM 3,532,664,457 3,552,215,854 19,551,397 6.0%
UBS 463,025,412 438,100,797 -24,924,615 4.4% MERL 321,928,512 340,853,698 18,925,186 5.8%
GS 344,579,762 359,798,836 15,219,074 3.4% AIEX 272,459,866 289,201,849 16,741,983 5.1%
MSDW 419,542,859 299,976,390 -119,566,469 3.3% GS 344,579,762 359,798,836 15,219,074 4.7%
MERL 321,928,512 340,853,698 18,925,186 3.1% PERSH 28,353,790 42,762,726 14,408,936 4.4%
MACQ 323,126,709 307,409,007 -15,717,702 3.0% CSUI 292,789,960 306,860,800 14,070,840 4.3%
CSUI 292,789,960 306,860,800 14,070,840 2.9% MACP 74,796,973 88,292,394 13,495,421 4.1%
AIEX 272,459,866 289,201,849 16,741,983 2.7% Other 720,163,570 768,140,470 47,976,900 14.7%
NAL 182,916,945 226,722,190 43,805,245 2.1%

325,599,636
HUB24 201,916,715 198,720,019 -3,196,696 2.1%


BBY 221,686,939 209,901,853 -11,785,086 2.1% MSDW 419,542,859 299,976,390 -119,566,469 36.7%
JPM 216,642,783 206,919,276 -9,723,507 2.0% DMG 815,301,721 771,278,161 -44,023,560 13.5%
PSL 173,263,695 150,866,722 -22,396,973 1.6% UBS 463,025,412 438,100,797 -24,924,615 7.7%
INST 149,633,143 152,735,838 3,102,695 1.5% PSL 173,263,695 150,866,722 -22,396,973 6.9%
SOSL 109,862,267 110,154,601 292,334 1.0% ITG 32,139,760 15,639,761 -16,499,999 5.1%
MACP 74,796,973 88,292,394 13,495,421 0.8% MACQ 323,126,709 307,409,007 -15,717,702 4.8%
FOST 75,930,965 80,345,653 4,414,688 0.7% BBY 221,686,939 209,901,853 -11,785,086 3.6%
D2MX 74,503,138 76,358,958 1,855,820 0.6% JPM 216,642,783 206,919,276 -9,723,507 3.0%
CIMB 61,556,565 55,015,056 -6,541,509 0.6% MOELIS 13,689,507 4,388,947 -9,300,560 2.9%
TPPM 57,359,245 59,173,943 1,814,698 0.5% CIMB 61,556,565 55,015,056 -6,541,509 2.0%
ORDS 40,734,448 45,941,859 5,207,411 0.4% EURO 11,929,852 6,171,350 -5,758,502 1.8%
CLSA 41,266,387 39,484,529 -1,781,858 0.4% INV 27,197,873 21,751,526 -5,446,347 1.7%
Others 551,950,042 531,706,571 -20,243,471 5.0% Other 469,681,998 435,767,191 -33,914,807 10.4%
Totals 10,338,014,108 10,338,014,108 0 100%

Data covers from Sept 30, 2010 to Sept 30, 2011 -325,599,636
Institutional ownership as a group only
showed marginal changes despite the
enormous volumes put through the market
which amounted to around 10.34 Billion
shares.

Open short positions also increased by 74
million shares over the period which would
be represented by some institutional
holdings decreasing through the lending of
shares but other holdings increasing through
the purchase of shares sold short.

The fact that short selling transactions are
corralled within institutional holdings and
the possibility of collusion between
sophisticated investors, possibly explains
how positions are so readily unwound
without price impact.
i.e. through co-operation or collusion
22

While the actual trading volumes associated with institutional trading are not obvious - (access to the
register is required to assess the volumes of shares moving in and out of holdings) - it is interesting that the
Citicorp Nominees holding reduced by 29.5 million shares when their broker Citigroup Global Markets
(CITI) showed net purchases of 85.5 million shares.
Also, the increases in holding by JP Morgan Nominees of 121.9 million shares are not reconcilable with the
broker trading for JPM which bought 206.9 million shares and sold 216.6 million shares for net selling of
9.7 million shares. Their market share was only 2.0% yet changes to the register are very considerable.
The fact that changes to institutional shareholdings dont reflect the intense trading carried out by
institutional fund managers raises concerns about possible attempts to create artificial pricing levels.
CuDeco Comparison: Re Citicorp Nominees Trading
By way of further example, over the same period (Sept 30, 2010 to Sept 30, 2011) the CuDeco register
reveals a more or less static holding for Citicorp Nominees of around 1.3 million shares. Yet from that core
holding, trading resulted in around 49 million shares moving in and out of the Citicorp Nominees account
as shown below. However Citigroup, the broker, only traded around 10 million shares with almost 1 million
of net purchases.
Trading in relation to CuDeco Sells Buys Net
Broker Trades- Citigroup Global
10,470,364 11,345,035 874,671
Off On Net
Register Entity - Citicorp Nominees
49,325,532 48,964,278 -361,254

The holding of 1.3 million shares in the case of CudDeco was traded to the extent of almost 50 million buys &
sells through a range of brokers not just Citigroup Global (CITI) and there is the possibility that additional
buys and sells didnt even make it to the register because of the netting of trades each day. The data clearly
demonstrates how difficult it is to keep track of trading and to ensure that all buys and sells represent fair
trades. Such trading also has enormous implications for the artificial setting of pricing levels.
If the Citicorp Nominees holding of 1.3 million shares in the case of CuDeco can be used to generate share
flows of almost 50 million into and out of the holding, it suggests that the holding in Lynas Corporation
which stood at 118 million shares in 2010, would be associated with extraordinary levels of share flows -
Share flows with the potential to overwhelm the market and to distort price discovery. Adding to concerns
are doubts about the identity of the brokers responsible for Citicorp Nominees trading especially given that
Citigroup Global Markets (CITI) trading volumes contradict what has occurred on the register.
In terms of which broker was responsible for the majority of trades for the likes of JP Morgan Nominees,
Citigroup Nominees and HSBC Nominees, one can only surmise but certainly the leading broker,
Commonwealth Securities, has to be deemed the one most likely. However the system needs to be far far
better than that. Guesswork should not have any role in determining who did what and when, an essential
requirement to be able to say whether trading has been fair and reasonable and respectful of trading
guidelines. The situation strongly suggests that the market has traded predominantly without effective
regulation because of the opaque dealings surrounding the holdings held by institutions.
Period 4
Period 4 represents an extended 16 month decline in the Lynas share price where a further 66% loss of
value occurred as prices returned to early 2010 levels. The company however was a vastly different
company by April 2013 with its project at an advanced stage of development compared to where it was
Period
Sep 30, 2010 to Sept 30, 2011
23

back in early 2010. Commonwealth Securities was again the dominant broker with a 26% market share and
an extremely strong bias towards accumulation as prices retreated, with 207.4 million net purchases. JPM
and Morgan Stanley were strong net sellers of stock, with open shorts over the period increasing by a
further 83 million shares. The data suggests that a substantial amount of COMM buying was related to
short selling by the two corporate brokers, although access to the register and the auditing of accounts
would be required to properly assess shareholder changes.
The changes of institutional holdings on the register as reflected by the 2011 and the 2012 Annual Reports
reflect some of the selling taking place with overall institutional ownership falling from 68.7% to 53.5%.
The major fluctuations are summarized in the table.
LYC Top 20
SHAREHOLDERS
2011 2012
NET Change
Sep-21 Sep-06
HSBC Nominees 480,053,780 276,093,124 -203,960,656
J P Morgan 427,541,736 335,437,244 -92,104,492
Citicorp Nominees 89,145,387 107,768,260 18,622,873
National Nominees 149,382,705 143,585,176 -5,797,529
Merrill Lynch Noms 4,252,292 12,662,843 8,410,551
Credit Suisse Europe - - -
ABN Amro Nominees 8,129,264 7,033,724 -1,095,540
AMP Life 8,793,180 8,793,180 0
Cogent Nominees 4,557,513 0 -4,557,513
QLD Invest Corp 5,235,314 0 -5,235,314
Totals 1,177,091,171 891,373,551 -285,717,620

Broker trading data closely corresponding to the 2011 and the 2012 Annual Reports is summarized below .

BROKER SELLS BUYS NET % Share BROKER SELLS BUYS NET BUYS NET %
COMM 1,513,356,116 1,611,374,669 98,018,553 26.5% COMM 1,513,356,116 1,611,374,669 98,018,553 32.1%
CITI 623,763,927 636,000,018 12,236,091 10.7% ETRD 390,849,021 437,335,146 46,486,125 15.2%
DMG 471,228,591 415,848,725 -55,379,866 7.5% AIEX 194,226,776 221,459,130 27,232,354 8.9%
ETRD 390,849,021 437,335,146 46,486,125 7.0% PERSH 34,918,987 60,746,773 25,827,786 8.5%
UBS 302,177,079 277,458,095 -24,718,984 4.9% MACP 55,010,233 75,845,688 20,835,455 6.8%
GS 305,416,198 245,761,411 -59,654,787 4.7% PSL 89,923,562 104,849,194 14,925,632 4.9%
MSDW 248,863,342 217,545,060 -31,318,282 3.9% CITI 623,763,927 636,000,018 12,236,091 4.0%
MACQ 219,671,232 220,702,970 1,031,738 3.7% ORDS 34,598,135 39,920,140 5,322,005 1.7%
AIEX 194,226,776 221,459,130 27,232,354 3.5% RBSM 19,591,522 24,048,436 4,456,914 1.5%
BBY 174,933,770 172,391,981 -2,541,789 2.9% CMCS 31,908,638 36,329,913 4,421,275 1.4%
CSUI 164,906,552 168,799,007 3,892,455 2.8% Other 746,944,914 792,170,386 45,225,472 14.8%
PSL 89,923,562 104,849,194 14,925,632 1.6%

304,987,662
SOSL 88,274,804 92,605,248 4,330,444 1.5%


VIRT 83,125,908 71,847,333 -11,278,575 1.3% GS 305,416,198 245,761,411 -59,654,787 19.6%
MERL 84,164,356 65,791,410 -18,372,946 1.3% DMG 471,228,591 415,848,725 -55,379,866 18.2%
MACP 55,010,233 75,845,688 20,835,455 1.1% JPM 80,095,875 44,594,932 -35,500,943 11.6%
INST 65,042,197 65,319,226 277,029 1.1% MSDW 248,863,342 217,545,060 -31,318,282 10.3%
JPM 80,095,875 44,594,932 -35,500,943 1.1% UBS 302,177,079 277,458,095 -24,718,984 8.1%
D2MX 59,904,856 59,764,947 -139,909 1.0% MERL 84,164,356 65,791,410 -18,372,946 6.0%
NAL 57,501,969 55,638,446 -1,863,523 1.0% CIMB 50,499,254 37,336,977 -13,162,277 4.3%
PERSH 34,918,987 60,746,773 25,827,786 0.8% EURO 12,170,050 738,750 -11,431,300 3.7%
TPPM 43,487,204 47,653,506 4,166,302 0.8% VIRT 83,125,908 71,847,333 -11,278,575 3.7%
CIMB 50,499,254 37,336,977 -13,162,277 0.7% BTIG 36,250,234 25,192,934 -11,057,300 3.6%
SUSQ 38,167,722 37,334,347 -833,375 0.6% CLSA 24,261,255 13,828,743 -10,432,512 3.4%
ORDS 34,598,135 39,920,140 5,322,005 0.6% RBC 9,993,709 2,077,393 -7,916,316 2.6%
Others 432,056,699 422,239,986 -9,816,713 7.2% Other 462,826,683 448,063,109 -14,763,574 4.8%
Totals 5,906,164,365 5,906,164,365 0 100%

Data covers from Sept 26, 2011 to Sept 6, 2012 -304,987,662
Institutional ownership showed a substantial
reduction as 5.9 Billion shares were bought
and sold over the 12 month period. Trading
volumes almost halved compared to the
previous 12 months while 285 million shares
dropped out of the leading institutional
holdings. The change is reflected by holdings
of 100,000 shares or more in size increasing
in number by 3,073. It represents 105 million
shares moving into this category from the
year before.

Open short positions also increased by a
further 128.7 million shares over the period.
.
24

Again the broker activity by CITI and JPM for example, contradicts changes on the register by Citicorp
Nominees and JPM Nominees indicating the difficulties in properly assessing what has actually occurred
with trading.

The table summarizes the situation.
Entity Changes to Registry Holdings Net Trading by House Brokers
JPM Nominees 92.1 million decrease JPM: 35 million Net Sells
Citicorp Nominees 18.62 million Increase CITI: 12.24 million Net Buys

Complicating the issue in attempting to correlate broker trading with the register is the reality that with
ASX trading and reporting, there is no way of knowing that the House Broker activity of say JPM is even
done on behalf of JPM Nominees and it is the same with broker CITI and the entity Citicorp Nominees.
Research demonstrates that in some instances where JPM Nominees for example have been involved in
substantial volumes of trades, broker JPM has actually been absent from the market or had only a minor
influence on trading. (Refer to Section 7.4.3.2 regarding JPM Substantial Shareholder Notices)

7.4.2.4.1 SUMMARY OF LYNAS SHARE TRADING BY MARKET SHARE - January 2010 to April 2013
The following table highlights the trading statistics of the leading brokers for 40 months of trading.
Broker Code Total Value Sells Buys Net Share %
Commonwealth COMM $18,171,998,693 6,053,292,282 6,256,034,902 202,742,620 31.0%
Citigroup CITI $5,251,836,938 1,895,417,746 2,021,257,033 125,839,287 9.0%
Deutsche DMG $4,350,778,494 1,651,116,960 1,587,764,574 -63,352,386 7.4%
E-Trade ETRD $3,195,184,611 1,193,103,976 1,319,292,021 126,188,045 5.5%
UBS UBS $2,778,538,574 1,082,435,813 1,043,430,004 -39,005,809 4.7%
Goldman Sachs GS $2,326,244,912 1,001,604,604 874,187,541 -127,417,063 4.0%
Morgan Stanley MSDW $2,128,457,411 935,621,738 779,009,852 -156,611,886 3.6%
Macquarie Insto MACQ $1,990,530,511 815,099,129 771,832,287 -43,266,842 3.4%
AIEX AIEX $1,726,458,280 644,980,678 706,268,019 61,287,341 2.9%
Credit Suisse CSUI $1,717,521,274 644,568,745 652,512,937 7,944,192 2.9%
Merrill Lynch MERL $1,561,781,365 526,653,301 517,439,017 -9,214,284 2.7%
BBY BBY $1,390,943,903 554,111,475 533,916,490 -20,194,985 2.4%
JPMorgan JPM $1,217,791,212 511,669,861 443,048,854 -68,621,007 2.1%
Patersons PSL $999,000,897 384,118,581 369,571,595 -14,546,986 1.7%
Nomura NAL $960,114,449 249,642,254 291,312,917 41,670,663 1.6%
HUB24CS HUB24 $919,189,594 275,215,414 272,572,549 -2,642,865 1.6%
Instinet Nomura INST $774,144,059 262,830,276 272,238,994 9,408,718 1.3%
State One Stock SOSL $652,572,866 258,317,794 265,036,108 6,718,314 1.1%
Macquarie Retail MACP $499,015,721 171,569,008 199,323,380 27,754,372 0.9%
D2MX Pty Ltd D2MX $413,110,625 174,352,373 176,009,665 1,657,292 0.7%
Fosters FOST $371,115,820 115,993,098 119,757,317 3,764,219 0.6%
CIMB CIMB $346,370,557 143,203,301 130,027,684 -13,175,617 0.6%
Third Party TPPM $343,540,655 121,568,363 129,552,487 7,984,124 0.6%
Ord Minnett ORDS $269,665,103 100,168,588 105,968,336 5,799,748 0.5%
Susquehanna SUSQ $260,102,216 108,683,439 108,828,539 145,100 0.4%
ABN AMRO Clear ABNA $247,339,288 176,765,094 176,562,302 -202,792 0.4%
Pershing PERSH $243,999,603 92,792,715 121,779,954 28,987,239 0.4%
Virtu Financial VIRT $243,239,429 153,653,734 132,953,176 -20,700,558 0.4%
CMC Markets CMCS $232,689,201 87,361,724 97,996,102 10,634,378 0.4%
Bell Potter BELL $219,854,795 88,832,447 75,690,291 -13,142,156 0.4%
CLSA CLSA $219,504,893 109,309,928 69,122,664 -40,187,264 0.4%
RBS Morgans RBSM $204,575,213 79,253,358 97,063,539 17,810,181 0.3%
F.W Holst FWH $175,267,137 54,623,274 60,569,623 5,946,349 0.3%
BTIG BTIG $174,835,535 70,475,305 61,101,766 -9,373,539 0.3%
Timber Hill Aus TIMR $172,550,922 66,607,641 69,289,059 2,681,418 0.3%
INVESTEC INV $146,935,666 59,593,373 41,009,508 -18,583,865 0.3%
ITG Aust. ITG $143,942,478 54,890,908 54,627,541 -263,367 0.2%
Morrison MORR $141,778,775 70,958,119 71,141,222 183,103 0.2%
Shaw SHAW $135,262,886 53,345,047 53,712,580 367,533 0.2%
25

Broker Code Total Value Sells Buys Net Share %
Southern Cross STHC $108,916,966 51,243,424 27,514,546 -23,728,878 0.2%
Morgan Smith SBAR $101,703,598 34,946,925 35,138,386 191,461 0.2%
Austock AUST $98,108,153 41,307,894 36,040,244 -5,267,650 0.2%
GETCO Aust GETCO $88,463,259 46,581,553 37,959,755 -8,621,798 0.2%
RBC Securities RBC $83,282,040 37,966,919 31,695,539 -6,271,380 0.1%
Wilson WILS $82,782,052 28,200,094 39,698,855 11,498,761 0.1%
CameronSec CAM $72,721,466 25,710,903 26,346,372 635,469 0.1%
Hartleys HART $70,843,187 25,613,092 32,703,046 7,089,954 0.1%
Daiwa DAIW $65,434,497 21,882,822 24,051,755 2,168,933 0.1%
Euroz EURO $59,676,175 45,599,900 18,774,761 -26,825,139 0.1%
IMC Pacific IMCP $54,353,509 33,056,968 32,599,173 -457,795 0.1%
Phillip Capital PCAP $40,111,066 15,398,124 16,658,582 1,260,458 0.1%
Wealthhub Sec NATO $35,853,669 19,627,692 34,928,029 15,300,337 0.1%
Evans & Partner EVAN $35,331,159 13,634,676 11,573,379 -2,061,297 0.1%
Baillieu BAIL $33,584,469 16,758,358 13,283,930 -3,474,428 0.1%
Moelis Sec MOELIS $32,393,383 16,654,411 10,421,966 -6,232,445 0.1%
MINC Financial MINC $24,624,755 11,475,131 13,798,203 2,323,072 0.0%
Carmichael CARM $21,540,127 7,506,117 6,833,916 -672,201 0.0%
Stonebridge STBG $19,839,324 8,198,309 14,758,094 6,559,785 0.0%
Taylor TAYL $18,503,179 8,119,783 7,129,806 -989,977 0.0%
MF Global Sec MFGBL $18,112,960 3,078,779 8,607,243 5,528,464 0.0%
Burrell BRLL $15,541,387 6,728,347 6,498,593 -229,754 0.0%
RBS Securities RBSA $15,341,296 11,600,662 13,199,674 1,599,012 0.0%
Argonaut AGNT $11,790,812 7,490,530 3,097,402 -4,393,128 0.0%
JDV JDV $10,163,025 4,340,862 4,973,655 632,793 0.0%
Petra Capital PETRA $7,926,866 3,639,668 2,475,000 -1,164,668 0.0%
Others - $49,551,390 24,496,638 25,087,712 591,074 0.1%
Totals $58,594,278,330 21,664,660,045 21,664,660,045 0 100%

7.4.2.4.2 SUMMARY BY LEADING NET BUYERS and LEADING NET SELLERS
NET BUYERS NET SELLERS
BROKER SELLS BUYS NET BUYS BROKER SELLS BUYS NET SELLS
Commonwealth 6,053,292,282 6,256,034,902 202,742,620

Morgan Stanley 935,621,738 779,009,852 -156,611,886
E-Trade 1,193,103,976 1,319,292,021 126,188,045

Goldman Sachs 1,001,604,604 874,187,541 -127,417,063
Citigroup 1,895,417,746 2,021,257,033 125,839,287

JPMorgan 511,669,861 443,048,854 -68,621,007
AIEX 644,980,678 706,268,019 61,287,341

Deutsche 1,651,116,960 1,587,764,574 -63,352,386
Nomura 249,642,254 291,312,917 41,670,663

Macquarie Insto 815,099,129 771,832,287 -43,266,842
Pershing 92,792,715 121,779,954 28,987,239

CLSA 109,309,928 69,122,664 -40,187,264
Macquarie Retail 171,569,008 199,323,380 27,754,372

UBS 1,082,435,813 1,043,430,004 -39,005,809
RBS Morgans 79,253,358 97,063,539 17,810,181

Euroz 45,599,900 18,774,761 -26,825,139
Wealthhub Sec 19,627,692 34,928,029 15,300,337

Southern Cross 51,243,424 27,514,546 -23,728,878
Wilson 28,200,094 39,698,855 11,498,761

Virtu Financial 153,653,734 132,953,176 -20,700,558
CMC Markets 87,361,724 97,996,102 10,634,378

BBY 554,111,475 533,916,490 -20,194,985
Instinet Nomura 262,830,276 272,238,994 9,408,718

INVESTEC 59,593,373 41,009,508 -18,583,865
Third Party 121,568,363 129,552,487 7,984,124

Patersons 384,118,581 369,571,595 -14,546,986
Credit Suisse 644,568,745 652,512,937 7,944,192

CIMB 143,203,301 130,027,684 -13,175,617
Hartleys 25,613,092 32,703,046 7,089,954

Bell Potter 88,832,447 75,690,291 -13,142,156
State One Stock 258,317,794 265,036,108 6,718,314

BTIG 70,475,305 61,101,766 -9,373,539
Stonebridge 8,198,309 14,758,094 6,559,785

Merrill Lynch 526,653,301 517,439,017 -9,214,284
F.W Holst 54,623,274 60,569,623 5,946,349

GETCO Aust 46,581,553 37,959,755 -8,621,798
Ord Minnett 100,168,588 105,968,336 5,799,748

RBC Securities 37,966,919 31,695,539 -6,271,380
MF Global Sec 3,078,779 8,607,243 5,528,464

Moelis Sec 16,654,411 10,421,966 -6,232,445
Foster Stockbro 115,993,098 119,757,317 3,764,219

Austock 41,307,894 36,040,244 -5,267,650
CCZ Statton 988,000 4,038,695 3,050,695

Argonaut 7,490,530 3,097,402 -4,393,128
Timber Hill Aus 66,607,641 69,289,059 2,681,418

Baillieu 16,758,358 13,283,930 -3,474,428
MINC Financial 11,475,131 13,798,203 2,323,072

HUB24CS 275,215,414 272,572,549 -2,642,865
Daiwa 21,882,822 24,051,755 2,168,933

Lodge 2,219,450 25,500 -2,193,950
D2MX Pty Ltd 174,352,373 176,009,665 1,657,292

Veritas Sec 2,184,713 89,345 -2,095,368
RBS Securities 11,600,662 13,199,674 1,599,012

Evans & Partner 13,634,676 11,573,379 -2,061,297
Bridges 1,977,663 3,329,183 1,351,520

Petra Capital 3,639,668 2,475,000 -1,164,668
Others 323,226,261 327,857,384 4,631,123

Others 294,351,187 290,798,272 -3,552,915
26

7.4.2.4.3 COMMENTS
Overall, Lynas data suggests that there has been substantial retail involvement with trading, particularly
with the reduction in institutional holdings in 2012, but generally, large tranches of shares have been
consistently passed back and forth between sophisticated investors.
Extensive short selling has been instrumental in both constraining prices (Period 2) and profiting from the
share price being brought back down as occurred in Periods 3 & 4. The institutional presence is clearly
demonstrated in the changes in open short positions. Short positions increased from 6.7 million when ASIC
commenced reporting open positions back on June 16, 2010, to 236.8 million late last year. They stood at
203.2 million at the end of April 2013. It means that institutional entities have lent out over 200 million
shares and that other sophisticated entities who borrowed them are obliged to return them.
However historical precedent suggests that the current positions will be unwound without an impact on
prices via one or more of the following mechanisms:
In off-market dealings between entities sympathetic to each others trading positions;
In on-market trading possibly with buying spread across a number of brokers with other entities
acting to supply stock as sellers again through a spread of brokers to camouflage the activity and
support between operative brokers;
Through cheap placement stock should it become available.
The situation with short selling impacting prices on the downward side but with no impact on prices as
short positions are covered represents one of the ways prices are legally but unfairly manipulated in
modern markets. The relentless push for lower prices through dubious short selling practices is currently
one of the main drivers of our market. The situation desperately requires remediation by Treasury as it is
injurious to the market on so many levels. For example:
Market integrity is an obvious casualty closely followed by a lack of trust and a loss of confidence in the
system by many participants impacted by the relentless push for lower prices.
Low share prices are resulting in many companies being starved of capital with failure and bankruptcy a
likely scenario for many juniors and mid cap companies.
The development of important national assets is being jeopardized with the winding back of projects,
closures and the mothballing of future projects.
Control over National assets is being secured by overseas conglomerates through cheap takeovers.
Profits taken from the markets by multinationals trading as sophisticated investors represents a loss in
tax revenues as they are structured to minimize their taxation obligations.
Constricted project development is stifling employment growth.
Artificially low share prices inevitably lead to reduced productive enterprise, reduced job growth and
reduced export revenues because of companies needing to wind back their operations. It also leads to
a reduced tax take by the Federal Government.
There is also a reduction in tax revenues from investors unable to generate profits from their
investments because of a severely compromised market.
Retirees with reduced income from superannuation, again because of severely compromised markets,
are forced to seek assistance from Government welfare, adding further to budgetary pressures.
There is a reduction in state royalties through mine closures and the non-development of mining assets.

The negative impact of short selling far outweighs the dubious levels of liquidity it is meant to supply to the
market, and has resulted in sophisticated investors benefiting at the expense of all other participants.

27

The Activity of Retail Brokers
The Lynas Corporation trading data shows strong levels of activity within the ranks of retail brokers where
Commonwealth Securities, E*TRADE, Australian Investment Exchange (AIEX) and Macquarie Retail (MACQ)
were all leading net buyers of stock. However, a good portion of the business within the ranks of retail
brokers is likely to have facilitated and camouflaged the washing of shares back and forth by institutions.
Institutional brokers including Morgan Stanley, Goldman Sachs, JP Morgan and Deutsche Bank were heavy
net sellers and their selling, including the large volumes of shares sold short, would no doubt have been
absorbed by institutional buying with brokers working in tandem. Logically, a lot of that buying is
represented by the accumulation that occurred within the retail brokers. The camouflage of institutional
trading through strategic use of retail brokers is a common theme in trading at critical periods across many
ASX companies. The extent of institutional activity in COMM is quantified in Section 7.4.3.5.1.2
The sort of share flows put through the market where churn (and very likely non-genuine buying and
selling) is a constant feature of trading, simply cannot take place without high levels of co-operation
between brokers. Or put another way, influential trading entities most likely disguise their trading agendas
by strategically placing both buying and selling across a wide spread of brokers. The non-genuine nature of
transactions shows up with changes to holdings on a much smaller scale than suggested by the buying and
selling taking place in the market.
Substantial Shareholder Disclosures
Scepticism about market integrity is not helped when it is noted that with 21.66 Billion buys and sells
occurring over a 40 month period, substantial changes to the register have generally concerned just 3
entities i.e.; Mitsubishi Financial Group, JP Morgan Group and Morgan Stanley Group. While it is not known
who deals for Mitsubishi in the market, the market shares of the house brokers for the JP Morgan and the
Morgan Stanley groups were only 2.1% and 3.6% respectively. It leaves an extensive amount of trading
that is unable to be accounted for particularly when the leading broker Commonwealth Securities had a
market share of 31%.
The dealings of Commonwealth Securities can be partially tracked on the register through its retail
investors, however the majority of its trading is likely to revolve around institutional clients and their
dealings are cloaked with anonymity and are difficult to quantify. It is similar with Citigroup (9 %),
Deutsche Bank (7.4%), UBS (4.75%) and Goldman Sachs (4%) resulting in the majority of transactions taking
place being virtually opaque to the market.
The data demonstrates the extent of obfuscation that takes place and the difficulties in reconciling trading
based solely on broker and registry data. The trading by institutions in support of corporate agendas and
exemplified by the high levels of open short positions also makes it difficult to assess the merits of the
company based on fundamental considerations. The difficulties in being able to accurately monitor trading
also makes the task of effective regulation nigh on impossible, particularly if there isnt a preparedness or
capability to audit accounts and to get to the heart of major transaction flows.
The high levels of churn associated with institutional holdings and the poor returns for investors exposed
to managed funds is possibly signalling the wide scale abuse of funds under management. This is
particularly vexing as massive profits would have accrued through the large volumes of short selling that
has accompanied a share price fall from $2.50 at its peak to back around 50 cents, while long term
shareholders have endured an 80% fall in the value of their holdings.
28

There is also the question of whether institutional fund managers with their extensive buying & selling
through multiple brokers (referred to as trading churn) and a flexible system for accounting for trades are
segregating profitable trades into house trading accounts or into the accounts of favoured entities. The
possibility also exists for unprofitable trades to be apportioned to, say, mutual fund and pension fund
accounts under management quite apart from the access provided to their managed holdings for stock
lending purposes. Certainly pension funds have generally showed poor returns since the GFC, where short
selling has been a dominant feature of trading despite the massive profits that would have accrued from
short selling.
There is also the suspicion that trading churn aids in generating commissions for fund managers
irrespective of whether clients profit from the exercise, and there is a chance that some of the churn is
designed to support the need for revenues to fund the fees charged for stock lending. Certainly the holding
costs represented by, say, 200 million borrowed shares require substantial cash flows to support the
borrowings.
Scepticism about the role played by the funds management industry cannot be avoided when investment
bank profits are consistently robust compared to the negative or meagre returns of the funds they manage
on behalf of super funds, mutual funds and the general public as shown below.
RETIREMENT funds for staff at Goldman Sachs and the Commonwealth Bank have topped an official list of
the nation's best-performing super funds, as non-profit and in-house corporate funds maintain their track
record of higher returns.
In contrast, funds offered by banks and wealth managers to the general public have underperformed over
the past decade, according to a snapshot of the $1.4 trillion sector <LINK>





29


Section 7.4.3
SUBSTANTIAL SHAREHOLDER DISCLOSURES IN RELATION TO
LYNAS CORPORATION

7.4.3.1 MITSUBISHI UFJ FINANCIAL GROUP


Substantial shareholder notices assist in drawing attention to what occurs with trading by providing some
transparency regarding the relationships between:
substantial shareholder affiliates, (i.e. the entities that comprise the substantial shareholder
group); and
the House Broker connected to the substantial shareholder; and
other brokers who have transacted for the substantial shareholder from time to time.

The information enables checks against broker trading records such as provided by IRESS, to reveal what
has taken place with the trading within the group.

It needs to be borne in mind that what isnt disclosed is buying and selling undertaken by other brokers on
behalf of the substantial shareholder group, especially if such buying and selling nets out, and so doesnt
impact the register. Such buying and selling could easily be put in place to assist in managing the market to
achieve the trading objectives of the substantial shareholder but it essentially represents an invisible
presence with the potential for achieving artificial pricing levels. In particular, it may represent the sort of
trading behaviours that have been ruled illegal by the recent High Court decision regarding market
manipulation. (Refer: Link to the High Court judgement)

A case in point is trading in CuDeco which was detailed in Research Paper 6.5 Section 6.5.4.10.2.1 as per
the following excerpt.

Overall trading from July to Dec 2010 was also associated with 73+ million Wash Trades that have been
completely invisible to the market, many of which are likely to have originated within the ranks of retail
brokers. The trades are invisible because of the obfuscation that occurs with settlements and the fact that
many of the trades have been netted out and havent made it to the register. The trades did, however,
manage to influence prices and market sentiment.

Substantial shareholder notices therefore provide an opportunity to unravel some of the mysteries of
trading and to help identify where the system might be falling short in delivering market integrity and fair
trading.

30

7.4.3.1.1 THE SEGREGATION OF ACCOUNTS BELONGING TO SUBSTANTIAL SHAREHOLDER GROUPS
The notice by Mitsubishi UFJ Financial Group on Oct 29, 2012 reveals how holdings belonging to a
substantial shareholder can be distributed into multiple accounts across the register that are usually held
by investment banks acting as custodians. Part of the Oct 29 announcement is reproduced below.
HOLDERS OF RELEVANT INTERESTS:

The fact that the Mitsubishi notice is exceedingly difficult to read also illustrates the difficulties faced by
regulators in attempting to assess the reasonableness of trading. Also, many substantial disclosures can be
read easily enough but are nevertheless difficult to interpret simply because of the way information is
presented. There can be a real difficulty accurately processing many pages of data and verifying what has
been presented, particularly with the likes of the UBS Group as highlighted in Research Papers 7.1 and 7.2.
The other problem with assessing trading regarding the Mitsubishi Group is that it isnt known which
brokers have acted on their behalf. Issues surrounding accurately interpreting what has occurred with
trading represent a major shortcoming of the system as it currently operates.
To help provide some clarity, the details contained in the Mitsubishi notice have been re-interpreted below.
HOLDER OF RELEVANT INTEREST REGISTERED HOLDER NUMBER OF SHARES
Mitsubishi UFJ Financial Group Inc. Mitsubishi UFJ Asset management Co. Ltd 496,228
Mitsubishi UFJ Financial Group Inc. Mitsubishi UFJ Trust and Banking Corporation 3,550,480
Mitsubishi UFJ Financial Group Inc. Unknown 3,233,795
Mitsubishi UFJ Financial Group Inc. Unknown 682,002
31

HOLDER OF RELEVANT INTEREST REGISTERED HOLDER NUMBER OF SHARES
Mitsubishi UFJ Financial Group Inc. Citigroup Pty Ltd 1,169,679
Mitsubishi UFJ Financial Group Inc. HSBC Australia 2,367,240
Mitsubishi UFJ Financial Group Inc. HSBC Custody Nominees Australia Ltd 52,559,393
Mitsubishi UFJ Financial Group Inc. JP Morgan Chase Bank N.A. 929,657
Mitsubishi UFJ Financial Group Inc. JP Morgan Nominees Australia Ltd 3,657,231
Mitsubishi UFJ Financial Group Inc. National Nominees Limited 2,474,629
Mitsubishi UFJ Financial Group Inc. The Hong Kong and Shanghai Banking Corp. 930,433
Mitsubishi UFJ Financial Group Inc. National Australia Bank Ltd 1,917,390
Mitsubishi UFJ Financial Group Inc. Unknown 13,130,773
Mitsubishi UFJ Financial Group Inc. DTC through Morgan Stanley 235,289
Mitsubishi UFJ Financial Group Inc. National Nominees Limited 23,850

The placing of multiple accounts across multiple institutions such as Citigroup, JP Morgan, HSBC, National
Nominees and others, potentially enables trading abuses to manifest as each account can be used to
generate buying and selling designed to achieve particular trading agendas for the Group concerned.
Typically some entities could be churning their holdings to confuse the market, but in support of other
group entities who may be positioned to accumulate (or dispose of) large volumes of shares. While
representing a team approach to trading, by its very nature such trading is manipulative. The tendency for
trading to show little change to beneficial ownership on the register means that a good portion of such
trading is likely to be non-genuine and done for strategic reasons.
Such arrangements do help to explain how shares can travel back and forth continuously but with no
significant changes occurring to the overall holding of the group. Such activity, when considered as the net
dealings of a single substantial holder and not the transactions associated with multiple entities that are
registered separately, may well be revealing trading patterns that in intent and execution have the
hallmarks of market fixing.
The various holdings of substantial shareholder Mitsubishi Group, for example, are in turn co-mingled on
the register amongst the nominee holdings of other shareholder groups under the guardianship of the
various investment banks. The arrangement coincides with a system where broker transactions dont
identify the entities associated with trades, and registry data doesnt identify brokers responsible for the
shareholder movement of substantial shareholder entities. The situation again suggests that the market is
basically unregulated when it comes to being able to assess who has actually been responsible for trading
trends and whether the market has been compromised by any unfair trading agendas.
The fact that the registered holders of substantial numbers of shares can be listed as unknown as in the
Mitsubishi example, also heightens concerns about how little accountability there is in within the current
system.
Unfortunately, despite claims of efficient management of holdings, reduced handling costs, convenient
administration etc., the separation of broker trading from what occurs on the register and the
dissemination of holdings within a trading group across multiple registered holders sets the preconditions
for market manipulation to be able to occur if and when required. The situation constitutes a blanket of
opaque activity from a large number of entities that sits on top of the market and which is likely to have a
significant impact on the fairness of the market, especially in view of the 21.66 billion Lynas Corporation
shares that have traded in just over 3 years.
32



Section 7.4.3 contd
LYNAS CORPORATION LTD
SUBSTANTIAL SHAREHOLDER DISCLOSURES

7.4.3.2 JP MORGAN CHASE & CO AND ITS AFFILIATES
33

OVERVIEW

7.4.3.2.1 OBSERVATIONS IN RELATION TO JPM SUBSTANTIAL SHAREHOLDER NOTICES
The following observations relate to insights into trading as provided by JP Morgan substantial shareholder
notices when reviewed against IRESS broker trading data. The observations have been drawn from
extensive analysis of trading patterns that is detailed in the sections that follow.
The observations highlight the potential for entities to have exercised control over pricing levels and to
have benefited from the pricing outcomes achieved when attempting to acquire stock and when
attempting to dispose of stock. The situation does not reflect well for the integrity of the Lynas market,
and by extension, for the markets in ASX stocks in general.
The observations include:
JPM Affiliates initially accumulated a major holding through a range of brokers not their House
Broker JP Morgan Securities Australia (JPM).
JPM became an active trader for the group after substantial shareholder status was established.
Market manoeuvring by the JPM Group with orders distributed across multiple brokers was
evident in trading:
o prior to a major equity capital raising announced on Sept 29, 2009 underwritten by JPM;
o associated with a rare earths conference staged in Japan on Nov 18, 2011 which was
facilitated by JP Morgan;
o in and around the release of broker coverage by JPM;
o associated with a JP Morgan sponsored New York presentation on Nov 27, 2010.
Broker JPM looks to have traded on behalf of JPM Affiliates for some of the time, however it has
also traded opposite to Affiliate activity on many other occasions. The JPM trading profile suggests:
o trading to benefit other clients or their own House Account possibly based on inside
knowledge of the activities of the substantial shareholder; and/or
o trading in support of the objectives of its Affiliates who were mainly using other brokers for
their buying and selling.
Selling on good news is one thing but the selling down of the substantial holding during a critical
period where the company was being promoted, needs to be viewed in conjunction with:
o having an intimate involvement with the company as a major shareholder over a long period
of time;
o helping to set up share price appreciation through extensive involvement in the market in
conjunction with a range of other brokers; and
o supporting the company with broker coverage and through company promotions.
It needs to be kept in mind that if algorithmic trading is designed to exercise control over the market
and if in the process, imbalances in holdings are created, or adjustments need to be made in relation
to short exposures and securities lending obligations, then dark pools provide an all to convenient
mechanism to exchange or redistribute shares without a market impact on pricing levels.
Extensive adjustments can also be made off-market as well, demonstrating that there is ample
flexibility within the entire system for market manipulation to be able to flourish.

34


None of the trading behaviours associated with the JPM Substantial Shareholder Group that
suggest a conflict of interest with their House Broker appear to have been adequately monitored by
existing market surveillance. Certainly brokers dont appear to have been challenged.
The fact that the great majority of trading avoids disclosure, because it travels beneath the 5%
compulsory disclosure requirement, is likely to mean that the majority of the trading taking place is
also ineffectively monitored. Unfair corporate positioning, control over trading and the
maintenance of artificial prices, all appear to be eminently achievable under existing arrangements.
The majority of substantial shareholder notices are in such a form that analysis is difficult or not
even possible. Difficulties accessing or interpreting data because of the way it is presented, or what
is not provided, is a major concern.

7.4.3.2.2 JP MORGAN SUBSTANTIAL SHAREHOLDER NOTICES
JP Morgan has been active on the Lynas register from Aug 26, 2005 when they announced an initial
substantial shareholder notice representing ownership of 5.58% of the Company. The series of notices by JP
Morgan shown in the table enable the trading activity of JPM as the House Broker to be contrasted against
trading undertaken by the JPM Affiliates that formed the substantial shareholder group. It also helps in
identifying the extent of trading conducted for JPM Affiliates by other brokers external to the group.

Significant events concerning Lynas Corporation, including substantial shareholder announcements, have
also been highlighted in the table.

Date Company Announcement Link Per cent Prior Final Change
26/08/2005 Becoming a substantial holder - J.P. Morgan PDF 5.58% - 12,965,874 12,965,874
9/02/2006 Change in substantial holding - J.P. Morgan PDF 7.82% 12,965,874 18,940,146 5,974,272
24/03/2006 Change in substantial holding - J.P. Morgan PDF 10% 18,940,146 24,197,856 5,257,710
5/05/2006 Change in substantial holding - J.P. Morgan PDF 11.04% 24,197,856 26,991,740 2,793,884
18/08/2006 Change in substantial holding - J.P. Morgan PDF 7.27% 26,991,740 27,257,710 265,970
10/05/2007 Change in substantial holding - J.P. Morgan PDF 5.83% 27,257,710 29,261,310 2,003,600
20/03/2008 Change in substantial holding - J.P. Morgan PDF 6.97% 29,261,310 39,740,988 10,479,678
25/07/2008 Change in substantial holding - J.P. Morgan PDF 5.88% 39,740,988 38,123,189 -1,617,799
12/12/2008 Change in substantial holding - J.P. Morgan PDF 6.93% 38,123,189 44,969,063 6,845,874
29/09/2009 Equity Raising PDF


6/10/2009 Change in substantial holding - J.P. Morgan PDF 8.10% 44,969,063 53,277,042 8,307,979
2/11/2009 Change in substantial holding by J.P. Morgan PDF 9.57% 53,277,042 107,957,781 54,680,739
9/11/2009 Change in substantial holding by J.P. Morgan PDF 7.20% 107,957,781 108,489,673 531,892
18/11/2009 Hong Kong Rare Earths Conference Address PDF
18/11/2009 Hong Kong Rare Earths Conference - Presentation PDF


19/11/2009 Change in substantial holding by J.P. Morgan PDF 6.01% 108,489,673 99,472,645 -9,017,028
18/03/2010 Ceasing to be a substantial holder - J.P. Morgan PDF 4.83% 99,472,645 79,853,919 -19,618,726
17/08/2010 Becoming a substantial holder - J.P.Morgan PDF 5.02% 79,853,919 83,048,257 3,194,338
4/10/2010 Ceasing to be a substantial holder - J.P. Morgan PDF 4.62% 83,048,257 76,464,897 -6,583,360

The JPM substantial shareholder disclosures provide a means to observe and assess trading behaviours
which in itself is an exception as many disclosure notices by other Lynas Corporation substantial
shareholder groups are not so readily interpreted.
The difficulties generally relate to:
relevant details not being provided; or
information being presented in a way that is difficult to read and interpret; or
information not being able to be readily accessed by systems that enable what has taken
place with trading to be quantified, verified and assessed.
35

The lack of uniformity and a lack of clarity regarding critical substantial shareholder information reflects
badly on the regulatory system, particularly given the technologies now available for the unambiguous
presentation of information. What is of even more concern, however, is the extent of trading about which
very little is known because:
1. it avoids disclosure as it travels beneath substantial shareholder requirements; and/or
2. it is conducted by sophisticated investors where dealings are essentially opaque to the market.
As mentioned, broker JPM had a market share of just 2.2% of the 21.66 billion Lynas Corporation shares
that were bought and sold over the period Jan 2010 to Apr 2013. Their disclosures are a drop in the ocean
compared to the massive volume of trades that have occurred.
The following sections trace through the substantial shareholder notices of JPM Affiliates and draw attention
to the extent of their dealings involving other brokers, compared to the dealings associated with their House
Broker JPM. The exercise is important as it is likely to demonstrate the sort of trading relationships that
occur across all shareholder groups. The implications for market integrity are profound.

7.4.3.2.3 SUBSTANTIAL NOTICE AUGUST 26, 2005: Becoming a substantial holder - J.P. Morgan
JP Morgan Chase & Co and their Affiliates ware announced as a substantial shareholder on Aug 26, 2005
with a holding of 12,965,874 shares which at the time represented 5.58% of the register. The notice
detailed purchases of 1,936,600 shares, suggesting that JPM already held 11,029,274 shares prior to the
notice period. The purchase of 1.5 million shares on Aug 24, 2005 triggered substantial shareholder status
resulting in the holding being disclosed.
The broker JPM Morgan (JPM) had no involvement in the trading of Lynas shares in the period covered by
the notice, which was April 28, to Aug 24, 2005. In fact in the 8 month period from Jan 2005 to the end of
August 2005, JPM only bought 150,000 shares while selling 50,000 shares for a net gain of 100, 000 shares.
JPM broker trading suggests that JPM Affiliates disclosed in the notice were using other brokers in building
the substantial holding.
Trading records reveal that the 1.5 million share purchase on Aug 24, 2005 is likely to have been organised
through broker CIMB with the selling coming from Southern Cross and Tolhurst. The details are as follows.
Broker Code Sells Buys Net Market Share
CIMB CIMB 0 1,500,000 1,500,000 29.4%
Wealthhub Sec WEALTH 0 150,000 150,000 3.0%
Commonwealth COMM 0 74,936 74,936 1.5%
E-Trade ETRD 0 64,725 64,725 1.3%
Bell Potter BELL 0 60,000 60,000 1.2%
Patersons PSL 0 28,000 28,000 0.6%
HSBC HSBC 0 15,215 15,215 0.3%
Merrill Lynch MERL 0 10,000 10,000 0.2%
Tolhurst TOL 1,194,000 0 -1,194,000 0.3%
Southern Cross STH 1,289,815 648,409 -641,406 1.0%
Westpac WPC 50,000 0 -50,000 37.8%
AIEX AIEX 17,470 0 -17,470 23.5%


36

7.4.3.2.4 SUBSTANTIAL NOTICE FEBRUARY 9, 2006: Change in substantial holding - J.P. Morgan
JP Morgan announced an increase in holding of 5.97 million shares through the period Feb 1 to Feb 7, 2006
with the purchase of 5,000,000 shares on Feb 7, the most significant single acquisition. The trading on Feb
7 was as follows:
Broker Code Sells Buys Net Market Share
Austock AUST 0 5,000,000 5,000,000 34.3%
Southern Cross STHC 20,000 215,000 195,000 1.6%
Ord Minnett ORDS 0 100,000 100,000 0.7%
Hartleys HART 0 100,000 100,000 0.7%
Macquarie Retail MACP 45,432 140,000 94,568 1.3%
AIEX AIEX 64,390 135,000 70,610 1.3%
Phillip Capital PCAP 0 68,000 68,000 0.5%
Others - 414,359 583,130 168,771 6.8%
Bell Potter BELL 4,486,521 10,000 -4,476,521 31.0%
Stonebridge STBG 599,179 0 -599,179 4.0%
UBS UBS 299,307 0 -299,307 2.0%
HSBC HSBC 199,000 120,000 -79,000 2.2%
Deutsche DMG 70,740 0 -70,740 0.5%
Tolhurst TOL 75,000 10,000 -65,000 0.6%
Morgan Smith SBAR 65,000 0 -65,000 0.4%
Commonwealth COMM 729,202 684,000 -45,202 9.6%
Others - 245,000 148,000 -97,000 2.6%

7.4.3.2.5 SUBSTANTIAL NOTICE MARCH 24, 2006: Change in substantial holding - J.P. Morgan
JP Morgan announced a further increase in holding of 5.26 million shares through the period Mar 20 to
Mar 23, 2006 with the purchase of 4,978,710 shares on Mar 23 the most significant single acquisition. JPM
were absent from the market during the period covered by the notice.
However on Mar 23, 2006 only 838,995 shares traded in the market so the sizeable purchase by JPM must
have been through off-market dealings although they werent identified as such on the disclosure notice.

7.4.3.2.6 SUBSTANTIAL NOTICE MAY 5, 2006: Change in substantial holding - J.P. Morgan
A further 2.79 million shares were added to the substantial shareholding according to the notice released
on May 5, 2006. It covered the period of trading from Apr 7 to May 2, 2006. There were 8 purchase
transactions declared and all but one was under 500,000 shares in size.

The JPM acquisition looks to
have come through Austocks
buying while Bell Potter
appears to be the seller.

JPM were completely absent
from the market during the
period
37

The tables show the trading details associated with the two largest transactions.












During the period covered by the notice broker JPM was entirely absent from the market.
In fact JPM was remarkably subdued with its trading, not only in regard to the notice period, but for the
entire period from Jan 1, 2005 right through to Aug 18, 2006.
JPM trading statistics for the extended period are shown in this table.







7.4.3.2.7 SUBSTANTIAL NOTICE AUGUST 18, 2006: Change in substantial holding - J.P. Morgan
The notice actually reveals very little, with only 265,970 shares added to the substantial holding compared
to the previous notice and JPM being absent from the market over the same period. The holding fell from
11.04% to 7.27% reflecting an increase in the size of the register because of a major capital raising.

Apr 7, 2006 JPM Affiliates purchased 485,000 shares.
The broker used for the buying was obviously Tolhurst.
Broker Sells Buys NET Share
TOL 20,000 485,000 465,000 24.6%
COMM 77,350 269,000 191,650 16.9%
HART 0 100,000 100,000 5.0%
HSBC 27,500 68,000 40,500 4.6%
UBS 0 40,000 40,000 1.9%
ETRD 0 26,500 26,500 1.3%
CMCS 0 16,000 16,000 0.8%
SBAR 0 16,000 16,000 0.8%
RBSM 0 3,000 3,000 0.1%
MSDW 373,000 0 -373,000 18.2%
STHC 263,500 0 -263,500 12.6%
CAM 220,040 0 -220,040 10.9%
ORDS 25,000 0 -25,000 1.2%
WPC 20,000 2,890 -17,110 1.1%


Apr 11, 2006 JPM Affiliates purchased 500,000 shares
Broker Sells Buys NET Share
AGNT 0 896,516 896,516 19.8%
TOL 0 515,000 515,000 11.5%
ORDS 0 83,000 83,000 1.9%
UBS 0 80,000 80,000 1.8%
CSUI 0 60,000 60,000 1.3%
HART 0 40,000 40,000 0.9%
ETRD 149,500 173,300 23,800 7.2%
CMCS 0 21,800 21,800 0.5%
IMCP 65,715 65,715 0 2.9%
BELL 1,120,000 0 -1,120,000 24.8%
REYN 271,028 0 -271,028 6.1%
COMM 374,495 227,337 -147,158 13.4%
MACP 68,000 0 -68,000 1.5%
FOST 50,000 0 -50,000 1.1%
SHAW 93,245 50,000 -43,245 3.2%
WPC 15,000 0 -15,000 0.3%
AIEX 43,500 37,815 -5,685 1.8%

On Apr 7 the JPM Group purchases appear
to have come through Tolhurst with the
selling being through a mix of brokers.
On Apr 11 the JPM purchase again appears to have
come through Tolhurst although Argonaut may have
been involved as well. BELL were obvious sellers
Of particular note is that during the time broker JPM
was virtually absent from the market, 15.96 million
shares were added to the substantial holding of JP
Morgan Chase and its Affiliates through purchases made
through other brokers.
Period Jan 1, 2005 to Aug 18, 2006

Sells Buys NET
Broker JPM
50,000 250,000 200,000

38

7.4.3.2.8 SUBSTANTIAL NOTICE MAY 10, 2007: Change in substantial holding - J.P. Morgan
The May 10 notice shows another 1.974 million shares being added to the substantial holding. However
the trading by broker JPM between the previous notice and the May 10 notice was somewhat
contradictory. Its profile in the market underwent a dramatic change with the broker becoming an active
net seller of stock just as JPM Affiliates were accumulating shares.

Sells Buys Net
JPM Affiliates 356,000 2,329,900 1,973,900
Broker JPM 5,738,194 1,066,328 -4,671,866
The majority of buying for the substantial holding occurred on Feb 21, 2007 with a parcel of 2.156 million
shares purchased. The broker details for that day show that MF Global were likely to be acting for JPM
Affiliates with the bulk of the selling coming from Cameron Securities. JPM were again noticeably subdued
with their trading with 315,525 of net sales.
Net Buyers Feb 21 Sells Buys NET Market Share
MF Global 0 2,570,000 2,570,000 17.9%
Credit Suisse 0 545,882 545,882 3.9%
Merrill Lynch 24,000 228,956 204,956 1.8%
Patersons 38,644 170,000 131,356 1.5%
Commonwealth 316,673 429,964 113,291 5.2%
AIEX 15,912 125,549 109,637 1.0%
CIMB 0 102,150 102,150 0.7%
E-Trade 227,587 327,930 100,343 3.9%
Morgan Smith 4,000 84,700 80,700 0.6%
Net Sellers Feb 21

Cameron Securities 1,641,549 60,000 -1,581,549 11.9%
Austock 769,433 0 -769,433 5.4%
Hartleys 432,000 0 -432,000 3.0%
JPMorgan 317,053 1,528 -315,525 2.2%
Citigroup 238,419 29,000 -209,419 1.9%
Carmichael 226,107 18,000 -208,107 1.7%
Macquarie Insto 162,664 0 -162,664 1.1%
JDV 115,000 33,700 -81,300 1.1%

7.4.3.2.9 SUBSTANTIAL NOTICE MARCH 20, 2008:
The March 20, 2008 announcement disclosed further purchases as well as securities lending share flows
which resulted in an increase to voting rights of 10.5 million shares. The table contrasts buying and selling
by affiliates against the trading by broker JPM for the period covered by the notice.
May 10, 2007 to Feb 1,2008 Sells Buys Net
JPM Affiliates
1,441,500 8,286,190
6,844,690
Broker JPM
7,696,518 6,794,930 -901,588
JPM is again seen to be a significant churner of stock with a net selling bias at the time the substantial
holding was increased, at least in part through buying implemented by other brokers. The selling by JPM
while its affiliates were accumulating presents as a contradiction and has implications for market integrity.
Accompanying the buying and selling by affiliates were securities lending dealings resulting in 52, 500
shares moving OFF the register through returns of borrowed stock and 3,994,788 shares moving ON to the
register through borrowings.
At face value, the selling of stock by broker
JPM during a period that JPM Affiliates
were accumulating stock has connotations
of market rigging.
39

Anomalies with trading are further highlighted by considering individual days covered by the March 20,
2008 disclosure where volumes were conspicuous compared to most other days. The following data
contrasts the buying and selling activity of JPM Affiliates versus the activity of broker JPM.
The affiliate selling on May 14 looks to have been done through UBS or at least partially through UBS while
the affiliate buying on May 21 looks to have been handled mostly by Credit Suisse (CSUI). On both days,
JPM was absent from the market.


Broker Sells Buys NET Share

Broker Sells Buys NET Share
UBS 1,301,897 1,860,000 558,103 71.6%

CSUI 0 1,922,153 1,922,153 39.5%
MACP 0 20,000 20,000 0.5%

COMM 116,932 201,195 84,263 6.5%
Others 40733 94,798 54,065 3.0%

Others 66,350 177,617 111,267 5.0%
COMM 412,640 142,135 -270,505 12.6%

CITI 775,197 20,000 -755,197 16.4%
ETRD 151,000 62,240 -88,760 4.8%

TOL 485,632 0 -485,632 10.0%
Others 303,098 30,195 -272,903 7.5%

Others 984,928 108,074 -876,854 22.4%


JPM Affiliates appear to have used Austock for their buying on July 4, 2007 (see below) while the services
of Bell Securities or JPM itself appear to have been engaged on Jan 31, 2008.


Broker Sells Buys NET Share

Broker Sells Buys NET Share
AUST 20,000 1,500,000 1,480,000 21.4%

BELL 0 1,000,000 1,000,000 18.8%
CSUI 39,500 889,820 850,320 13.1%

JPM 29,973 719,529 689,556 14.2%
MSDW 12,140 209,000 196,860 3.1%

MSDW 0 154,200 154,200 2.9%
COMM 223,757 297,600 73,843 7.4% UBS 181,600 200,000 18,400 7.1%
Others 70,800 478,510 407,710 7.8% Others 10,890 43,792 32,902 1.0%
MACQ 1,655,846 35,000 -1,620,846 23.8%

MACQ 813,905 79,132 -734,773 16.8%
CARM 460,000 0 -460,000 6.5%

COMM 318,006 105,395 -212,611 8.0%
AIEX 401,200 21,539 -379,661 5.9% BBY 200,000 7,316 -192,684 4.0%
CIMB 176,922 10,100 -166,822 2.6%

DMG 181,712 3,349 -178,363 3.5%
Others 486,521 105,117 -381,404 8.4% Others 919,966 343,339 -576,627 23.9%

7.4.3.2.10 SUBSTANTIAL NOTICE JULY 25, 2008: Change in substantial holding - J.P. Morgan
A sell down of the JP Morgan Chase & Co holding was declared in the July 25 notice. The number of shares
involved was around 1.7 million. The table again contrasts buying and selling by affiliates against the
trading by broker JPM for the period covered by the notice.
Period Feb 4 to Jul 21, 2008 Sells Buys Net
JPM Affiliates 4,112,687 2,414,888 -1,697,799
Broker JPM 4,980,447 9,732,923 4,752,476

While it is uncertain how much of the selling and buying associated with JPM Affiliates was done by their
House Broker, JPM were busy purchasing large amounts of stock while their affiliates were net selling. The
contradictory trends again raise market integrity issues.
Anomalies on particular days of trading are highlighted in the following examples. Bell Securities again
appears to be the buyer for JPM affiliates on Feb 4, while Euroz very much appears to be the seller for
MAY 14, 2007 Sells Buys
JPM Affiliates 1,120,300 0
Broker JPM 0 0

MAY 21, 2007 Sells Buys
JPM Affiliates 0 2,120,300
Broker JPM 0 0

JULY 4, 2007 Sells Buys
Affiliates 0 1,500,000
JPM 0 0

JAN 31, 2008 Sells Buys
Affiliates 0 970,000
JPM 29,973 719,529

40

affiliates on Jul 24 with an exact match. Interestingly, JPM also looks to have been the buyer of the shares
sold by Euroz. It is a most unusual situation; if the motives were genuine, it would be expected that JPM
would simply cross the stock.



Broker Sells Buys NET Share Broker Sells Buys NET Share
BELL 0 1,145,688 1,145,688 17.2% JPM 0 506,493 506,493 13.3%
DMG 49,273 211,855 162,582 3.9% CSUI 47,837 411,347 363,510 12.1%
MERL 15,000 137,576 122,576 2.3% SHAW 0 217,000 217,000 5.7%
MACQ 794,672 898,622 103,950 25.5% CIMB 23,074 179,194 156,120 5.4%
WPC 108,000 203,000 95,000 4.7% BBY 0 62,124 62,124 1.6%
Others 33,000 105,079 72,079 2.1% Other 165,469 240,115 74,646 10.6%
AUST 401,107 0 -401,107 6.0% EURO 500,430 53,463 -446,967 14.5%
CAM 300,000 0 -300,000 4.5% PSL 227,776 0 -227,776 6.0%
CIMB 321,562 76,804 -244,758 6.0% COMM 280,671 93,580 -187,091 9.9%
MSDW 250,116 20,245 -229,871 4.1% UBS 156,216 0 -156,216 4.2%
COMM 502,202 352,788 -149,414 12.9% RBSM 85,595 0 -85,595 2.2%
AIEX 125,398 65,000 -60,398 2.9% MACQ 143,252 91,089 -52,163 6.2%
Others 422,331 106,004 -316,327 8.0% Other 269,493 45,408 224,085 8.3%

Selling by JPM Affiliates on Jul 18 looks to be related to the activities of either UBS or Goldman Sachs, while
the selling on Jul 21 could have been conducted by any one of a number of brokers including Austock,
Macquarie, Merrill, Citigroup or even Credit Suisse. JPMs broking profile was again relatively subdued on
both days with some buying while affiliates were selling.


Broker Sells Buys NET Share

Broker Sells Buys NET Share
PSL 0 672,523 672,523 5.1% CSUI 1,175,327 1,864,190 688,863 26.1%
COMM 268,943 509,884 240,941 5.9% MSDW 405,984 1,008,124 602,140 11.2%
DMG 56,334 289,064 232,730 2.6% BBY 101,300 563,000 461,700 6.6%
BELL 0 205,000 205,000 1.5% DMG 701,023 1,064,562 363,539 6.6%
STBG 0 194,164 194,164 1.4% CITI 3,216,294 3,576,486 360,192 6.3%
SBAR 75,000 263,000 188,000 2.5% #N/A 7,900 349,979 342,079 6.3%
WPC 100,000 273,699 173,699 2.8% CIMB 208,357 447,385 239,028 6.2%
JPM 38,161 198,833 160,672 1.8% JPM 41,617 184,783 143,166 4.7%
Others 1,249,647 1,792,502 542,855 23.0% Others 538,643 1,122,030 583,387 24.3%
UBS 2,054,173 100 -2,054,073 14.9% AUST 1,318,709 0 -1,318,709 0.3%
CSUI 204,451 1,442 -203,009 1.5% MACQ 1,223,331 434,854 -788,477 0.2%
MSDW 877,418 798,056 -79,362 13.1% MERL 996,837 684,781 -312,056 0.2%
BBY 70,000 20,450 -49,550 0.7% PSL 1,025,384 738,002 -287,382 0.2%
CIMB 162,408 116,392 -46,016 2.1% SBAR 250,000 0 -250,000 0.2%
GS 1,189,310 1,151,530 -37,780 18.4% COMM 888,559 784,833 -103,726 0.1%
Others 234,085 93,291 -140,794 0 Others 1,213,386 489,642 -723,744 0.7%


FEB 4, 2008 Sells Buys
Affiliates 0 1,185,000
JPM 75,000 31,503

JUN 24, 2008 Sells Buys
Affiliates 500,430 0
JPM 0 506,493

JUL 18, 2008 Sells Buys
Affiliates 1,773,171 0
JPM 38,161 198,833

JUL 21, 2008 Sells Buys
Affiliates 810,690 117,001
JPM 41,617 184,783

41

7.4.3.2.11 SUBSTANTIAL NOTICE DECEMBER 12, 2008: Change in substantial holding - J.P. Morgan
JP Morgan Chase and Associates increased their substantial holding by 6,845,874 shares through buying
and selling and also through securities lending over the period Jul 22 to Dec 9, 2008. The buying and selling
activities of JPM Affiliates versus the activity of broker JPM are summarized in the table.
Period: Jul 22 to Dec 9, 2008 Sells Buys Net
JPM Affiliates
1,349,673 7,983,337 6,633,664
Broker JPM 5,271,546 9,401,559
4,130,013
The marked selling by JPM compared to the selling by affiliates is again curious as the period saw strong
accumulation by the substantial shareholder. The data suggests that JPM is likely to have attended to
dealings by affiliates but in addition there looks to be churning of stock perhaps to aid the accumulation
taking place. Such trading behaviours, if accurately interpreted, ought to raise market integrity concerns.
Data for particular days showing variances between affiliate buying and selling with broker buying and
selling are summarized below. Other brokers were clearly active for affiliates on a number of the days listed.
Day Entity Sells Buys Net

Day Entity Sells Buys Net

Nov-28 JPM Affiliates 0 839,480 839,480

Sep-04 JPM Affiliates 341,894 2,350 -339,544

Nov-28 Broker JPM 109,100 18,954 -90,146

Sep-04 Broker JPM 868,478 3,716 -864,762


Day Entity Sells Buys Net

Day Entity Sells Buys Net

Dec-01 JPM Affiliates
5,783
638,073 632,290

Dec-02 JPM Affiliates 20,946 495,145 474,199

Dec-01 Broker JPM
5,783
0 -5783

Dec-02 Broker JPM 20,946 0 -20,946




Dec-04 JPM Affiliates 5,308 854,158 848,850

Dec-05 JPM Affiliates
6,089
413,678 407,589

Dec-04 Broker JPM 293,954 73,100 -220,854

Dec-05 Broker JPM
6,089
85,000 78,911






Dec-08 JPM Affiliates
0
519,233 519,233

Dec-09 JPM Affiliates
0
640,040 640,040

Dec-08 Broker JPM
344,000
112,069 -231,931

Dec-09 Broker JPM
56,000 66,281 10281



Although daily volumes were generally light throughout the period that shares were accumulated, the data
does demonstrate the synergies between brokers. Austock Securities are a case in point as shown below
where there can be no question that they have been acting for JPM Affiliates on occasions. While the
situation doesnt necessarily mean collusion it does raise questions about what interests are being served
and what is occurring with trading on other days that involves much larger volumes where the
relationships arent quite as obvious.


Broker Sells Buys NET Share

Broker Sells Buys NET Share
AUST 0 638,073 638,073 20.4% AUST 0 495,145 495,145 12.1%
CLSA 0 132,823 132,823 4.2% GS 64,305 295,091 230,786 8.9%
DMG 68,437 182,744 114,307 8.0% COMM 216,488 303,099 86,611 12.7%
UBS 1 103,192 103,191 3.1% CLSA 0 78,696 78,696 1.9%
MACQ 62,411 148,791 86,380 6.8% ETRD 98,226 138,471 40,245 5.8%
Others 20,342 115,699 95,357 4.7% Others 307,220 518,463 211,243 20.3%
COMM 669,644 121,194 -548,450 25.3% UBS 358,691 1,240 -357,451 8.8%
MSDW 296,352 0 -296,352 9.4% MSDW 353,755 0 -353,755 8.6%
ETRD 220,179 69,887 -150,292 9.2% DMG 243,064 82,078 -160,986 8.0%
AIEX 111,764 2,800 -108,964 3.5% INST 173,045 70,000 -103,045 6.0%
JDV 20,000 0 -20,000 0.6% CMCS 100,000 0 -100,000 2.4%
Others 104,907 58,834 -46,073 5.2% Others 123,774 56,285 -67,489 4.4%
DEC 1, 2008 Sells Buys
Affiliates 5,783 638,073
JPM 5,783 0

Dec 2, 2008 Sells Buys
Affiliates 20,946 495,145
JPM 20,946 0

42

7.4.3.2.12 SUBSTANTIAL NOTICE OCTOBER 6, 2009: Change in substantial holding - J.P. Morgan
A further increase to the substantial shareholding of JP Morgan Chase and associates was announced to
the market on Oct 6, 2009. The net increase amounted to 8.31 million shares. The notice covered trading
between Dec 9, 2008 and Oct 1, 2009. The buying and selling activities of JPM Affiliates versus the activity
of broker JPM are summarized in the table.
Period: Dec 9, 2008 to Oct 1, 2009 Sells Buys Net
JPM Affiliates
7,739,273 16,046,537 8,307,264
Broker JPM 16,362,276 11,045,870 -5,316,406

With the substantially increased volumes put through the market the contrast between net buying by JPM
Affiliates and net selling by broker JPM presents as a serious integrity issue, particularly given other
brokers were used for substantial levels of buying for JPM affiliates while JPM were heavy sellers. Possible
broker collusion, the genuineness of buying and selling and a possible unfair trading environment are
issues that require clarification given the patterns associated with trading and the relationships evident
between brokers.
The trading on specific days again helps to draw out the trading relationships between JPM Affiliates and
broker JPM and also the involvement of other brokers.







Broker Sells Buys NET Share

Broker Sells Buys NET Share
JPMorgan 0 1,295,618 1,295,618 9.7% Macquarie 772,978 1,453,400 680,422 13.4%
UBS 3,069 995,980 992,911 7.5% CIMB 655,698 1,252,020 596,322 11.5%
Macquarie Inst 438,350 1,071,539 633,189 11.3% Credit Suis 0 557,966 557,966 3.3%
Commonwealth 53,535 607,169 553,634 4.9% Merrill Lyn 969 321,901 320,932 1.9%
E-Trade 10,000 280,287 270,287 2.2% Instinet 0 290,604 290,604 1.8%
Others 365536 1178722 813,186 11.6% Others 1769229 2589288 820,059 26.2%
Deutsche 2,043,230 338,816 -1,704,414 17.9% JPMorgan 1,558,640 0 -1,558,640 9.4%
CIMB 1,663,837 353,998 -1,309,839 15.1% Citigroup 660,922 135,995 -524,927 4.8%
Morgan Stanley 1,266,163 167,429 -1,098,734 10.8% Goldman 1,184,541 706,731 -477,810 11.3%
Citigroup 426,303 113,655 -312,648 4.0% Tibra 267,174 14,992 -252,182 1.7%
Bell Potter 75,000 0 -75,000 0.5% Southern 122,500 0 -122,500 0.8%
Others 328,851 270,661 -58,190 4.5% Others 1,460,194 1,007,448 -58,190 14.8%

On the other hand, the sales on March 19, 2009 look to be routine with JPM selling on behalf of its
Affiliates to a range of brokers with no other broker involvement.

DEC 18, 2008 Sells Buys Net
Affiliates 831,988 2,127,606 1,295,618
JPM 0 1,295,618 1,295,618

Mar 19, 2009 Sells Buys
Affiliates 1,558,640 0
JPM 1,558,640 0

Dec 18, 2008 is particularly interesting as the buying and selling by affiliates nets out at 1,295,618 shares, the
exact number of shares purchased by JPM Morgan. It strongly demonstrates a strategic relationship between
JPM and other brokers in processing orders on behalf of JPM Affiliates. In particular, if the JPM buying was on
behalf of Affiliates then it means at the same time other brokers were selling 831,986 shares as well as buying
831,986 shares (i.e.; churning stock) to facilitate the JPM accumulation. That type of behaviour has the
hallmarks of market fixing and requires investigation.

43

On May 8, 2009 JPM Affiliates have obviously used Southern Cross for their buying while on Oct 1, 2009
the situation is much more complicated. Affiliates churned stock while strongly net accumulating shares
with the majority of buying done by other brokers such as COMM and GS, not JPM. Affiliate selling looks to
have been provided by JPM, with additional sales for unknown clients as well. Again the net effect is for
Affiliates to be buying stock while JPM were selling.
The other curiosity about Oct 1, 2009 is that the substantial holder notice listed 6.8 million purchases @
$0.47 and 2.15 million sales @ $0.65 cents yet JPMs buying averaged $0.671 and its selling averaged
$0.662. Also the lowest traded price on Oct 1 was $0.61. The numbers dont compute and the entire
situation requires clarification.


Broker Sells Buys NET Share

Broker Sells Buys NET Share
Southern Cross 0 1,680,000 1,680,000 13.0% Commonwealth 6,223,586 16,699,756 10,476,170 26.5%
Credit Suisse 76,627 985,000 908,373 8.3% Goldman Sachs 160,343 1,453,977 1,293,634 1.8%
BBY 73,000 321,665 248,665 3.0% Macquarie Insto 2,084,476 2,863,815 779,339 5.7%
Morgan Stanley 175 177,976 177,801 1.4% AIEX 672,598 1,357,844 685,246 2.3%
CMC Markets 21,000 100,000 79,000 0.9% BBY 1,565,002 2,202,437 637,435 4.3%
Others 524,460 617,303 92,843 8.8% Others 7,618,860 9,953,660 2,334,800 20.3%
Patersons 788,321 31,756 -756,565 6.4% Citigroup 4,028,670 537,297 -3,491,373 5.3%
Commonwealth 2,049,634 1,329,416 -720,218 26.0% JPMorgan 4,151,170 1,545,363 -2,605,807 6.6%
UBS 552,556 5,111 -547,445 4.3% Morgan Stanley 2,880,047 537,980 -2,342,067 3.9%
Kokomo 248,685 0 -248,685 1.9% Credit Suisse 2,353,340 77,000 -2,276,340 2.8%
AIEX 274,619 118,000 -156,619 3.0% InstinetNomura 2,941,865 1,139,600 -1,802,265 4.7%
Others 1,853,680 1,096,530 -757,150 22.9% Others 8,636,977 4,948,205 -3,688,772 15.67%


7.4.3.2.13 CAPITAL RAISING SEPTEMBER 29, 2009:
A capital raising at 45 cents per share was announced on Sept 29, 2009 for $450 million which was actually
underwritten by J.P Morgan. The raising was by way of a one-for-one entitlement offer at 45 cents per
share. The price represented a 50% discount to the last closing price on Sept 23 of 90 cents before a trading
halt was implemented. Both institutional investors and retail investors were invited to participate with the
offer closing oversubscribed. Share price movements before and after the fund raising are summarized in
the chart.


$0.30
$0.35
$0.40
$0.45
$0.50
$0.55
$0.60
$0.65
$0.70
May 8, 2009 Sells Buys
Affiliates 0 1,680,000
JPM 175 177,976

Oct 1, 2009 Sells Buys
NET
Affiliates 2,151,170 6,803,855 4,652,685
JPM 4,151,170 1,545,363


Share Price (Cents)
2009 Aug 3
Sept 23
Trading
Halt for
fund raising
Aug 25, ASX
Price Query
Oct 29
Strong price rise
leading up to the
capital raising
Resumption of trade
after the 1 for 1
entitlement offer
Potentially, an artificial
pricing level from which to
base a major fund raising?
44

The share price rise leading up to the capital raising was not driven by news and if anything, the news was
negative following the withdrawal of a proposed equity investment by China Nonferrous Metal Mining
Group (CNMC) which would have provided project financing. The rise in the share price was queried by
the ASX without the company being aware of any reasons for the share price rises.
Share price increases were obviously driven by informed insiders in setting up for the fund raising. Sellers
who had access to placement shares to replace shares sold into the market would have done exceedingly
well. Buyers presumably had access to placement shares as well to reduce the cost of purchases. If the
price rises were a corporate move to facilitate fund raising, many of the mechanisms outlined in Research
Paper 7.3, Section 7.3.1.6 for forcing prices downwards can equally be applied to ensure higher prices.
Such practices however are manipulative. There is also the chance that the build in pricing levels didnt
involve major changes to ownership with shares being bought and sold by the same interests acting
through different brokers.
Broker trading in the period Aug 3 to Sep 23 leading up to the trading halt is summarized below.
Net Buyers Sells Buys Net
Market Share
Instinet 5,051,684 16,986,852 11,935,168 4.6%
Goldman Sachs 4,453,297 12,834,444 8,381,147 3.8%
Austock 779,187 7,177,381 6,398,194 1.4%
CLSA 95,000 4,837,002 4,742,002 1.1%
Macquarie Insto 6,726,021 8,547,878 1,821,857 3.2%
RBS Morgans 1,598,657 3,040,108 1,441,451 1.0%
Merrill Lynch 1,913,303 3,058,232 1,144,929 1.1%
Daiwa 215,640 959,550 743,910 0.3%
UBS 10,301,445 10,922,664 621,219 4.4%
Others 12,158,523 14,599,589 2,441,066 5.6%
Net Sellers
Patersons 14,512,931 7,446,858 -7,066,073 4.2%
Commonwealth 55,497,184 49,642,071 -5,855,113 22.1%
Bell Potter 6,581,709 1,525,303 -5,056,406 1.7%
CIMB 7,373,623 3,605,745 -3,767,878 2.3%
Morgan Stanley 6,590,460 4,501,236 -2,089,224 2.5%
Westpac 8,475,881 6,621,264 -1,854,617 3.2%
Taylor 1,564,541 25,000 -1,539,541 0.4%
E-Trade 17,072,321 15,566,084 -1,506,237 6.9%
AIEX 6,327,828 4,973,021 -1,354,807 2.4%
JPMorgan 2,215,195 941,046 -1,274,149 0.7%
Others 68,461,715 60,154,817 -8,306,898 27.1%

7.4.3.2.14 SUBSTANTIAL NOTICE NOVEMBER 2, 2009: Change in substantial holding - J.P. Morgan
As underwriter, JP Morgan Chase & Associates participated strongly in the equity raising announced on Sept
29, 2009 resulting in an increase in their substantial holding of 54.7 million shares. Placement shares were
however offset by heavy net selling in the period covered by the notice (i.e., from Oct 5 to Oct 25, 2009)
The buying and selling activities of JPM Affiliates and broker JPM in the period covered by the notice are
summarized in the table.
Period Oct 5 to Oct 25, 2009 Sells Buys Net
Affiliates Buys & Sells 18,400,365 9,875,604 -8,524,761
Plus Placements - 61,495,500 61,495,500
Affiliate Totals 18,400,365 71,371,104 52,970,739

JPM Broker Activity 32,662,896 45,098,518 12,435,622
Instinets prominence is in
contrast to their trading from
Jan to July 2009 where they had
a market share of only 1.8%.
The reasons for their sudden
interest needs to be clarified.
JPM was a minor net seller
however its influence is more
likely to have registered through
its relationships with other
brokers where strong affiliations
have been evident in a range of
substantial shareholder notices.
The clients responsible for the net buying
of Instinet, Goldman, Austock and CLSA
and for the net selling by Patersons,
Commonwealth and Bell Potter are of
particular interest in assessing trading.
45

JPM was relatively active with its buying and selling at levels in excess that of its affiliates however they
were absent from the market on Oct 29 when their Affiliates were major buyers of stock.
Broker data for Oct 29, 2009 was as follows.



Net Buyers Sells Buys Net
Market
Share
Commonwealth 2,852,281 6,599,313 3,747,032 12.9%
RBS Morgans 223,250 1,845,000 1,621,750 2.8%
Bell Potter 5,000 980,000 975,000 1.4%
Deutsche 985,110 1,580,318 595,208 3.5%
Westpac 280,000 819,964 539,964 1.5%
Carmichael 0 460,000 460,000 0.6%
AIEX 168,587 610,899 442,312 1.1%
Shaw 400,000 840,000 440,000 1.7%
CMC Markets 171,700 562,047 390,347 1.0%
Others 3,315,922 6,471,635 3,155,713 13.4%
Net Sellers
UBS 10,880,482 6,660,080 -4,220,402 24.03%
Morgan Stanley 7,499,974 4,123,098 -3,376,876 15.87%
Merrill Lynch 1,965,895 374,321 -1,591,574 3.22%
E-Trade 4,600,659 3,283,635 -1,317,024 10.68%
Austock 1,200,000 400,000 -800,000 2.17%
Credit Suisse 970,817 407,774 -563,043 1.92%
Citigroup 350,366 183,627 -166,739 0.72%
Baker-Young 145,600 0 -145,600 0.19%
HUB24CS 200,000 109,075 -90,925 0.43%
CIMB 331,000 272,857 -58,143 0.82%
Others 37,000 0 -37,000 0.05%

The extent of trading churn across the market may also have been part of an accumulation strategy by
JPM Affiliates. Trading where a single entity can engage a network of brokers to achieve its trading
strategies and where the end result may involve strategic selling as well as net buying does not equate to
expectations of what fair and genuine trading ought to be about. In fact it makes it an imperative that
persistent trading anomalies be properly investigated.
7.4.3.2.15 SUBSTANTIAL NOTICE NOV 9, 2009: Change in substantial holding - J.P. Morgan
The Nov 9 announcement was more to do with adjusting the substantial holding to keep it in line with
changes to the register because of the large placement. The adjusted holding represented 7.2% of the
register.
7.4.3.2.16 SUBSTANTIAL NOTICE NOVEMBER 19, 2009: Change in substantial holding - J.P. Morgan
JP Morgan Chase sold a large parcel of shares immediately before a Rare Earths conference was hosted in
Japan. It resulted in its substantial holding reducing to 6.01%. The details are as follows.
Nov 5 to Nov 17, 2009 Sells Buys Net
Affiliate Trades 16,019,357 7,002,329 -9,017,028
JPM Broker Activity 16,019,357 21,624,969 5,605,612

The large sale occurred on Nov 17 and was for 16,007,817 shares, most of which were crossed by broker
JPM. The transaction was done at $0.51 and followed the purchase by JPM Affiliates of 6,687,411 million
shares at $0.45 cents on Nov 9. The purchases were conducted through other brokers, not JPM.

Oct 29, 2009 Sells Buys
Affiliates 13,562 8,629,381
JPM 13,562 43,410

The 8.629 million shares
purchased by JPM Affiliates
clearly came from a mix of
brokers, not JPM, with COMM
one of the more likely brokers
involved. RBS and Bell Potter
also appear to have bought
shares for Affiliates
The selling in the market looks
to have come from UBS and
Morgan Stanley
46

The details for Nov 9 are summarized in the table.

Sells Buys Net
Affiliate Trades 0 6,687,411 6,687,411
JPM Broker Activity 0 20,744 20,744

The leading brokers for Nov 9, 2009 were as follows.
BROKER SELLS BUYS NET Market Share Net Buying
MACQ 9,697,615 491,956 -9,205,659 24.4%

MERL 3,726,000
COMM 2,281,318 4,124,177 1,842,859 15.5%

COMM 1,842,859
MERL 96,350 3,822,350 3,726,000 9.5%

INST 1,821,651
UBS 2,664,768 348,700 -2,316,068 7.3%

DMG 1,133,933
DMG 519,999 1,653,932 1,133,933 5.3%

WPC 835,649
INST 0 1,821,651 1,821,651 4.4%

ETRD 783,435
ETRD 461,584 1,245,019 783,435 4.1%

CSUI 488,626
ABNA 810,000 792,962 -17,038 3.9%

AUST 312,147
WPC 285,945 1,121,594 835,649 3.4%

ORDS 250,651
GS 725,567 426,722 -298,845 2.8%

Net Selling
D2MX 523,549 511,403 -12,146 2.5%

MACQ -9,205,659
AUST 337,853 650,000 312,147 2.4%

UBS -2,316,068
PSL 415,737 300,000 -115,737 1.8%

CMCS -346,580
CSUI 69,118 557,744 488,626 1.5%

GS -298,845
KOK 289,520 319,532 30,012 1.5%

PSL -115,737
BBY 210,000 340,000 130,000 1.3%

STBG -100,000
IMCP 260,141 262,193 2,052 1.2%

JDV -47,422
MSDW 156,797 309,106 152,309 1.1%

BELL -46,561

The buying for JPM Affiliates has clearly been accomplished through a spread of brokers. However while
some brokers were buying on behalf of JPM Affiliates there is no way of knowing who they were and what
additional buying and selling was put through other brokers as trading churn. Such churn wouldnt have
made it to the register because the trades would have netted out. If a combination of buying and selling all
on behalf of JPM Affiliates was put in place to control the market while accumulation was taking place then
serious integrity issues would arise.






7.4.3.2.17 SUBSTANTIAL NOTICE MARCH 18, 2010: Change in substantial holding - J.P. Morgan
JP Morgan Chase and Associates continued with their selling into 2010 with the holding reducing to 4.83%
on March 15, 2010. It also meant that JP Morgan ceased as a substantial shareholder. The trading period
covered by the notice spans Nov 19, 2009 to Mar 15, 2010.
Trading activity accompanying the notice was as follows.
Period: Nov 19, 2009 to Mar 15, 2010 Sells Buys Net
JPM Affiliate Trades 38,668,998 20,921,127 (17,747,871)
JPM Broker Activity 17,860,139 65,880,398 48,020,259


Control over trading often results from buying and selling spread across multiple brokers with the effect that
the market is dominated by, say, one shareholder group. The orders are processed by algorithms that carry
out the orders seemingly innocuously but at the same time deliver specific trading agendas through weight
of numbers. It possibly demonstrates how the creation of artificial pricing levels (i.e., share price
manipulation) can take place on the ASX with full regulatory approval even though in reality the market can
effectively be rigged or dominated by the widespread influences of a single interest.

Substantial amounts of churning of holdings with a strong net selling bias has been undertaken by JPM
Affiliates with a substantial amount of their selling done by brokers other than JPM, yet JPM was a strong
net buyer throughout.

47

A month by month analysis of the trading accompanying the substantial notice provides clearer insights into
trading. The data that follows shows JPM broker activity corresponding to days when JPM Affiliates were
active in the market, as well as the JPM broker trades when the Affiliates were absent from the market
designated as Other in the table below. The data is shown in four sections spanning the period of the notice
which was from November 19, 2009 through to March 15, 2010.

NOV & DEC 2009 JANUARY 2010 FEBRUARY 2010 MARCH 2010

Sells Buys Sells Buys Sells Buys Sells Buys
Affiliate Activity 922,487 7,133,680 4,393,047 8,748,928 20,858,351 4,350,135 12,495,113 688,384
JPM Trades
5,778,453 19,500,988 2,884,905 6,993,277 3,278,423 8,710,748 1,374,046 14,493,837
Crossing Activity
2,950,582 2,950,582 1,297,348 1,297,348 852,338 852,338 1,065,270 1,065,270

JPM Trades (Other)
18,659,785 41,530,106 0 0 2,015,049 0 0 0

The data shows:
Strong levels of churn and net buying by broker JPM in Nov & Dec both when Affiliates were active
with their net buying, and also on days when the Affiliates were absent from the market;
Extensive selling involvement by other brokers on behalf of JPM Affiliates in January, February and
March compared to reduced levels of sales by broker JPM;
JPM appearing to leverage off the selling by Affiliates through other brokers by being a strong buyer
though February and March 2010; and
Crossings running at levels much lower than would be expected given JPM would be aware of the
selling needs of its affiliates and obviously had access to buyers for the stock.

The following summary contrasts all JPM Affiliate activity with all JPM broker trading for the days
when Affiliates were active in the market..
Period: Nov 19, 2009 to Mar 15, 2010 Sells Buys Net
Affiliate Trades 38,668,998 20,921,127 (17,747,871)
JPM Broker Activity 13,315,827 49,698,850 36,383,023
Including Crossings of: 6,165,538 6,165,538

Further patterns associated with trading can be observed for particular days through the notice period
where large tranches of shares were traded by JPM Affiliates. Examples include:



BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET SELLS SHARE
JPM 750,000 3,282,612 2,532,612 36.5%

STHC 2,300,000 0 -2,300,000 20.8%
COMM 542,719 764,230 221,511 11.8%

BELL 436,068 0 -436,068 4.0%
CSUI 0 116,281 116,281 1.0%

PSL 200,000 0 -200,000 1.8%
HART 0 100,000 100,000 0.9%

DMG 305,508 124,571 -180,937 3.9%
ETRD 105,577 168,327 62,750 2.5%

AIEX 89,901 16,545 -73,356 1.0%
CIMB 8,684 59,727 51,043 0.6%

MACQ 103,666 54,744 -48,922 1.4%
REYN 0 40,000 40,000 0.4%

D2MX 40,000 0 -40,000 0.4%
UBS 103,500 141,500 38,000 2.2%

JDV 22,050 0 -22,050 0.2%
IMCP 23,009 60,000 36,991 0.8%

BBY 59,929 45,000 -14,929 0.9%

DEC 30, 2009 Sells Buys
Affiliates 0 3,282,612
JPM 750,000 3,282,612
All sales were crossings.
The buying by JPM Affiliates has clearly been done through JPM with
Southern Cross the major seller. In previous notices, Southern Cross has
been a buyer of shares on behalf of JPM Affiliates.
Crossings ran at
low levels given
the stong buying
JPM had access to.
Affiliates were absent from the market corresponding to JPM being active
JPM were strong
buyers as Affiliates
heavily net sold
48






BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET SELLS SHARE
JPM 0 2,017,578 2,017,578 25.1%

STHC 1,950,000 0 -1,950,000 24.3%
DMG 100,631 376,637 276,006 5.9%

CSUI 1,000,000 120,590 -879,410 13.8%
COMM 239,575 477,410 237,835 8.9%

WPC 65,000 0 -65,000 0.8%
MACQ 55,107 221,607 166,500 3.4%

ETRD 171,323 108,800 -62,523 3.5%
CIMB 20,840 121,822 100,982 1.8%

SHAW 40,050 8,513 -31,537 0.6%
PSL 0 100,000 100,000 1.2%

#N/A 132,600 102,998 -29,602 2.9%
AIEX 5,000 104,000 99,000 1.4%

IMCP 63,364 42,000 -21,364 1.3%
KOKO 7,611 40,000 32,389 0.6%

KOKO 21,230 0 -21,230 0.3%
TIMR 0 17,500 17,500 0.2%

ABNA 25,427 19,345 -6,082 0.6%




BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET SELLS SHARE
GS 423,377 4,963,181 4,539,804 10.8%

COMM 5,249,024 2,212,725 -3,036,299 15.0%
MACQ 1,547,732 3,460,949 1,913,217 10.1%

ETRD 3,780,576 2,035,902 -1,744,674 11.8%
JPM 79,347 1,553,888 1,474,541 3.2%

MACP 1,494,200 30,000 -1,464,200 3.1%
PSL 409,000 1,196,000 787,000 3.2%

DMG 1,843,422 965,410 -878,012 5.7%
MERL 0 462,084 462,084 0.9%

TIMR 641,156 13,000 -628,156 1.3%
CSUI 250,300 706,783 456,483 1.9%

CIMB 550,313 0 -550,313 1.1%
UBS 313,465 616,911 303,446 1.9%

WPC 813,951 287,186 -526,765 2.2%
KOKO 149,525 353,563 204,038 1.0%

KOKO 552,000 55,000 -497,000 1.2%
SUSQ 0 201,806 201,806 0.4%

AIEX 570,458 148,600 -421,858 1.5%





BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET SELLS SHARE
MACQ 42,531 2,399,674 2,357,143 10.9% BBY 4,384,372 112,297 -4,272,075 20.0%
CSUI 100,711 1,175,846 1,075,135 5.6% CLSA 3,000,000 0 -3,000,000 13.3%
ETRD 81,234 1,008,978 927,744 4.9% GS 476,021 293,828 -182,193 3.4%
COMM 642,591 1,427,778 785,187 9.2% MERL 67,577 0 -67,577 0.3%
DMG 879,757 1,339,348 459,591 9.8% TPPM 60,220 0 -60,220 0.3%
INST 0 384,292 384,292 1.7% JDV 73,324 49,000 -24,324 0.5%
AIEX 100,000 462,663 362,663 2.5% SHAW 5,000 2,000 -3,000 0.0%
CIMB 4,453 259,536 255,083 1.2% BAIL 400 0 -400 0.0%
DEC 31, 2009 Sells Buys
Affiliates 0 2,017,578
JPM 0 2,017,578

The buying by JPM Affiliates on Dec 31 was again done through JPM
with Southern Cross (STHC) again the major seller, along with Credit
Suisse. It is puzzling why the line of stock sold by STHC wasnt simply
crossed rather than put through the market, especially given Southern
Cross previous involvement with JPM as a buyer of stock.

As it happened 52.3% of JPMs buying was the result of sales made by
Southern Cross and 23.6%. was from Credit Suisse sales.
FEB 22, 2010 Sells Buys
Affiliates 4,300,000 241,143
JPM 112,338 128,805


Broker JPM had little involvement with trading on Feb 22, 2010. Based on
the volume of sales, the selling by JPM Affiliates could have been done by
BBY in its own right or through a combination of brokers such as BBY,
CLSA, GS, COMM and DMG.
JAN 6, 2010 Sells Buys
Affiliates 0 4,979,447
JPM 79,347 1,553,888

The buying by JPM Affiliates looks to have been done partially through
JPM but at least 3.4 million shares were still bought through a mix of
other brokers such as Goldman, Macquarie, Merill Lynch and Patersons.
49





BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET SELLS SHARE
JPM 0 1,274,710 1,274,710 5.7% GS 5,510,805 261,484 -5,249,321 26.0%
CLSA 0 1,126,000 1,126,000 5.1% TIMR 210,000 35,505 -174,495 1.1%
MACQ 168,337 1,186,348 1,018,011 6.1% CIMB 192,066 26,083 -165,983 1.0%
INST 981,900 1,704,243 722,343 12.1% SOSL 80,000 0 -80,000 0.4%
AIEX 160,000 574,694 414,694 3.3% CSUI 426,322 362,173 -64,149 3.6%
DMG 797,197 1,207,912 410,715 9.0% UBS 54,874 1,000 -53,874 0.3%
MSDW 0 242,400 242,400 1.1% HUB24 30,000 0 -30,000 0.1%
KOKO 90,378 270,869 180,491 1.6% KOKO 42,000 16,701 -25,299 0.3%
ABNA 995,000 1,135,000 140,000 9.6% IMCP 36,000 24,062 -11,938 0.3%





BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET SELLS SHARE
UBS 2,000 944,278 942,278 5.9% CLSA 3,000,000 0 -3,000,000 18.6%
GS 19,478 730,006 710,528 4.6% MACQ 1,304,747 904,850 -399,897 13.6%
DMG 410,189 1,101,290 691,101 9.4% WILS 350,000 10,000 -340,000 2.2%
COMM 396,123 730,547 334,424 7.0% CIMB 181,364 40,575 -140,789 1.4%
MSDW 147,142 459,918 312,776 3.8% INST 170,418 30,291 -140,127 1.2%
CITI 121,623 356,779 235,156 3.0% ABNA 768,069 703,259 -64,810 9.1%
CSUI 308,531 511,332 202,801 5.1% SUSQ 40,275 0 -40,275 0.2%
KOKO 0 200,000 200,000 1.2% KOKO 58,603 25,000 -33,603 0.5%
IMCP 3,000 163,523 160,523 1.0% MACP 30,000 4,800 -25,200 0.2%





BROKER SELLS BUYS NET BUYS SHARE BROKER SELLS BUYS NET SELLS SHARE
DMG 731,507 1,935,120 1,203,613 12.7% MACQ 3,033,717 233288 -2,800,429 15.63%
JPM 11,952 1,119,000 1,107,048 5.4% CSUI 1,090,167 35926 -1,054,241 5.36%
COMM 832,571 1,627,278 794,707 11.7% INST 298,384 16409 -281,975 1.51%
CITI 439,001 717,687 278,686 5.6% ETRD 675,390 483612 -191,778 5.50%
PSL 26,113 299,750 273,637 1.6% AIEX 814,796 664300 -150,496 6.98%
GS 115,763 352,879 237,116 2.2% BBY 470,449 326214 -144,235 3.82%
TIMR 91,323 262,812 171,489 1.7% IMCP 127,956 26271 -101,685 0.74%
AGNT 0 150,000 150,000 0.7% CIMB 113,580 18031 -95,549 0.62%
ABN Amro 1,409,767 1,414,578 4,811 13.5%


FEB 23, 2010 Sells Buys
Affiliates 3,500,000 0
JPM 0 1,274,710

Feb 23 saw selling by Affiliates while JPM were significant buyers. It
potentially raises concerns about insider activity and the fairness of trading.
It is puzzling why the 1.27 million shares bought by JPM werent simply
crossed with the Affiliates who were selling, rather than put through the
market. Goldmans appears to have done the selling for JPM Affiliates
FEB 24, 2010 Sells Buys
Affiliates 3,000,000 0
JPM 195,714 183,938

The selling by JPM Affiliates looks to have been done through CLSA again
in a similar trading situation to what occurred on Feb 22 where they
were also likely to be a large seller for JPM Affiliates . JPM were virtually
absent from the market, althoiugh given their strong buying profile over
the period covered by the notice, it is strange that they didnt manage the
line of the stock.
FEB 25, 2010 Sells Buys
Affiliates 1,465,238 1,119,000
JPM 11,952 1,119,000

The selling by JPM Affiliates looks to have been done by MACQ or a
combination of brokers. On the other hand JPM did the buying for
Affiliates possibly knowing that the Affiliates were selling through other
brokers. It again raises the issue of why the shares werent crossed if the
selling was genuine?
The common theme across trading is that JPM has been a strong buyer while JPM Affiliates have been selling but
with an absence of crossings. However the inside knowledge within the group means that concerns about potential
market fixing and/or the setting of artificial pricing levels cant be avoided and the situation requires clarification.
50

FEB 25, 2010 Profitability Issues:
The substantial shareholder notice reveals that the trading by JPM Affiliates on Feb 25 was marginally loss
making with buying averaging $0.5000 cents and selling averaging $0.49992 cents. Of the 1.119 million
shares sold and re-purchased it represents a loss of $91.28.

The net effect of trading was to sell 1.465 million shares through the algorithms of one or more brokers
while JPM recovered 1.119 million of the shares through its own buying algorithm, yet the entire exercise
was slightly loss making. The trading appears very likely to have been motivated by reasons other than
generating profits.

The situation draws attention to the churn trading replicated by many other brokers for many other
entities not just the JPM substantial shareholder group. From a profit perspective it doesnt make sense,
and it suggests other motivations are in play such as:
Controlling the market through the use of algorithms spread across multiple brokers; and/or
Collecting management fees and commissions from funds under management.
The tick-by-tick trading by algorithms appears innocuous enough, and their design generally takes into
account the trading alerts that are normally triggered by ASX market surveillance. Market metrics such as
price rises (or falls), market volumes, the extent of crossings (including the frequency, the numbers, the
volumes and the types of crossings), the percentage of trades by particular brokers etc., are all generally
controlled by algorithms and kept within acceptable limits.

Judgments about the fairness of algorithms need to be assessed by the end result that is delivered by such
programs with time frames not just over the course of a day, but also over weeks and months. The
algorithms of multiple brokers, presumably tuned so as to favour the trading agendas of particular entities,
is likely to represent an unfair control mechanism that distorts the market and disadvantages all other
participants.

A case in point is the buying by JPM on Feb 25, 2010 which is summarized below from IRESS trading data.
Brokers selling to JPM and the volumes of shares sold are shown in the table.

Entity Selling
to JPM
Sales to
Broker JPM
% of JPM
Buys
Market
Share
ABNA 294,394 26.3% 13.5%
CSUI 161,610 14.4% 5.4%
MACQ 156,939 14.0% 15.6%
BBY 130.949 11.7% 3.8%
INST 113,046 10.1% 1.5%
IMCP 80,721 7.2% 0.7%
AIEX 53,520 4.8% 7.0%
DMG 44,541 4.0% 12.7%
COMM 23,705 2.1% 11.7%
CITI 19,842 1.8% 5.6%
PSL 14,213 1.3% 1.6%
ETRD 13,568 1.2% 5.5%
JPM 11.952 1.1% 5.4%
Total 1,119,000 100% 90.0%


While Macquarie and Credit Suisse were the two leading net
sellers on Feb 25, their stock that found its way into JPMs hands
on behalf of JPM Affiliates mostly did so through intermediaries.

The intermediaries were in effect the algorithms of a number of
brokers that purchased and Macquarie and Credit Suisse stock,
and then re-sold a substantial amount of it which then
eventually ended up with broker JPM.

The effect was that sales from 2 leading brokers were washed
through a range of brokers on its way to a major buyer in JPM.

ABN Amro played a major role as an intermediary because of its
leading market share represented by 1.415 million buys and
1.410 million sells.

Amros churn was a standout because of its large market share,
however the same process was replicated to varying extents by
the algorithms of other brokers, all effectively doing the same
thing but on a smaller scale.

That is, buying and re-cycling shares back into the market until
they end up with the likes of JPM in the current example.

A definitive view of trading would require the identities behind the buying and selling transacted by the likes
of ABN Amro. If related to JPM or their Affiliates, regulators would be faced with very major integrity issues.
51

Importantly, trading such as occurred on Feb 25 involved only minor changes to ownership and as such
effectively represents a form of wash trade. However with shares passing through the accounts of other
brokers the strict interpretation of a wash trade is voided although it is clear what has been achieved.

The situation is far different from making a legitimate sale then standing in the market to recover the shares.
It would be a worthwhile exercise to examine the order books of all brokers on Feb 25 to see exactly who
they were all acting for. The results could be very revealing.

With the selling by Affiliates integrated across multiple brokers and if the churning of stock by several
brokers was also designed to benefit broker JPM or JPM Affiliate interests then it could be argued that
trading on Feb 25 essentially had the same impact as wash trades and would have led to a severely
compromised market. It is why audits are so urgently needed in order to be able to comprehend what
exactly is taking place with trading and whether share prices are being influenced unfairly through control
over the market surreptitiously delivered by algorithmic trading programs. If not audits then much fuller
disclosures are required.




BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET BUYS SHARE
JPM 3,500 4,739,566 4,736,066 11.8% GS 4,892,515 1,236,034 -3,656,481 14.6%
UBS 314,000 2,284,639 1,970,639 6.2% EURO 3,000,000 30,000 -2,970,000 7.4%
DMG 1,019,971 2,494,645 1,474,674 8.6% MACQ 2,209,974 512,697 -1,697,277 6.8%
INST 0 1,290,119 1,290,119 3.2% CITI 885,382 373,785 -511,597 3.1%
CSUI 121,038 651,990 530,952 1.9% ETRD 651,492 238,094 -413,398 2.2%
COMM 2,452,012 2,969,288 517,276 13.4% AIEX 628,026 222,535 -405,491 2.1%
SUSQ 0 143,600 143,600 0.3% CIMB 422,320 67,897 -354,423 1.2%
SHAW 0 70,000 70,000 0.2% MINC 284,278 32,514 -251,764 0.8%
PSL 150,000 190,000 40,000 0.8% MERL 430,238 283,865 -146,373 1.7%




BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET BUYS SHARE
AUST 300,000 2,055,000 1,755,000 9.1%

STHC 5,000,000 0 -5,000,000 19.4%
ETRD 306,600 1,607,575 1,300,975 7.4%

MSDW 1,027,330 12,767 -1,014,563 4.1%
COMM 661,734 1,931,988 1,270,254 10.1%

MACQ 1,114,072 644,288 -469,784 6.8%
DMG 506,827 1,395,560 888,733 7.4%

UBS 426,796 40,950 -385,846 1.8%
GS 154,672 607,013 452,341 3.0%

RBSM 206,283 0 -206,283 0.8%
TIMR 0 365,354 365,354 1.4%

BBY 580,843 411,126 -169,717 3.9%
AIEX 65,000 415,201 350,201 1.9%

ABNA 1,173,853 1,073,211 -100,642 8.7%
INST 0 186,825 186,825 0.7%

IMCP 241,300 184,609 -56,691 1.7%
MERL 242,549 375,180 132,631 2.4%

BAIL 15,000 1,800 -13,200 0.1%

MAR 1, 2010 Sells Buys
Affiliates 4,291,019 0
JPM 3,500 4,739,566

The selling by Affiliates looks to have been done through GS or a mix of
brokers, but with JPM a strong buyer for the entire line of stock. Again it
is strange that the stock was put through the market rather than crossed.
MAR 16, 2010 Sells Buys
Affiliates 5,0000,00 0
JPM 0 0

The selling by JPM Affiliates on Mar 16, 2010 looks to have again been
done through Southern Cross Securities, with JPM completely absent
from the market.
52

7.4.3.2.18 EVENTS LEADING TO JPM AFFILIATES RESUMING AS A SUBSTANTIAL SHAREHOLDER

JPM ceased as a substantial holder on March 18, 2010, hosted a Conference on Rare Earths concerning
Lynas in early June, and then initiated coverage on Lynas in late June 2010. The JPM Group resumed its
substantial shareholder status in August 2010, about a month before hosting a Lynas presentation in
September 2010. All the while it was Morgan Stanley who was prominent as an active substantial
shareholder as shown in the summary of ASX announcments below.

Announcements by Lynas Corporation: March 18, 2010 to Oct 4, 2010

Date Announcement Link
18/03/2010 Ceasing to be a substantial holder - J.P. Morgan PDF
10/06/2010 Lynas Presentation - JP Morgan China Conference 10 June 2010 PDF
28/06/2010 J.P. Morgan initiates coverage of Lynas PDF
16/07/2010 Becoming a substantial holder - Morgan Stanley PDF
6/08/2010 Change in substantial holding - Morgan Stanley PDF
11/08/2010 Change in substantial holding - Morgan Stanley PDF
16/08/2010 Change in substantial holding - Morgan Stanley PDF
17/08/2010 Becoming a substantial holder - J.P.Morgan PDF
20/08/2010 Change in substantial holding - Morgan Stanley PDF
23/08/2010 Rare Earths Prices Update PDF
6/09/2010 Resource Estimate Increase - Heavy Rare Earths PDF
16/09/2010 Change in substantial holding - Morgan Stanley PDF
16/09/2010 Change in substantial holding - Morgan Stanley PDF
21/09/2010 Change in substantial holding - Morgan Stanley PDF
22/09/2010 Full Year Statutory Accounts PDF
27/09/2010 JP Morgan New York Presentation PDF
29/09/2010 Lynas signs new customer contract PDF
4/10/2010 Ceasing to be a substantial holder - J.P. Morgan PDF


7.4.3.2.19 SUBSTANTIAL NOTICE AUGUST 17, 2010: Becoming a substantial shareholder

The JP Morgan Group re-established itself as a substantial shareholder on Aug 13, 2010 in declaring a
combined holding with voting rights representing 5.02% of the Lynas register. The buying and selling of
JPM Affiliates in the period April 15, 2010 to August 13, 2010 leading up to the notice, together with JPM
broker buying and selling for the same period is summarized in the table.
Period: Apr 15 to Aug 13, 2010 Sells Buys Net
JPM Affiliate Activities 3,585,367 24,732,646 21,147,279
JPM Broker Trades 26,240,822 37,952,531 11,711,709

The data suggests that a substantial amount of selling (around 22.6 million shares) and a substantial
amount of buying (13.2 million shares) has been done for other clients on top of the selling and buying
done for JPM Affiliates. Such selling needs to be accounted for because if it represents trading churn that
has been netted out without an impact to the register then it would most certainly have compromised the
market while JPM affiliates were accumulating shares.
A summary of trading on a day by day basis provides further insights into the relationship between JPM
Affiliates and their House Broker JPM Securities Australia.

53

Trading details for May 4, 2010 (refer to the table below) show a direct match between the buying of
Affiliates and the activities of JPM. However the selling on May 5 presents as a contradiction with JPM
appearing to do the buying for Affiliates, but also selling a similar number of shares for other clients. If the
selling was related to short selling it would put doubts about the integrity of the market given the
accumulation taking place by affiliates. Also, if the selling was genuine it would make sense that the
majority of shares would be crossed and not put through the market. As it happened, crossings only
amounted to 496,327 shares.
On the days shown highlighted by the red rectangle, there were large amounts of buying by JPM Affiliates
not associated with their broker JPM. They were virtually absent as buyers on May 25, and May 26, 2010
and associated with only a third of the buying on May 27, 2010. It means that other brokers were the
active buyers for the substantial shareholder but it doesnt preclude further brokers actively churning stock
to facilitate the accumulation of shares for the substantial shareholder. It also means that insider
knowledge may have been an issue affecting the market, particularly with other brokers acting for the JPM
substantial shareholder group and with the JPM Group having close connections to the company.

Sells Buys
May 4,2010 Affiliate Activity 0 2,000,000

JPM Trading 17,435
2,000,000
May 5,2010 Affiliate Activity 0 2,905,338

JPM Trading 2,823,201 2,905,338
May 25,2010 Affiliate Activity 0 4,235,395

JPM Trading 211,616 81,666
May 26,2010 Affiliate Activity 0 2,148,090

JPM Trading 0 0
May 27,2010 Affiliate Activity 0 1,955,247

JPM Trading 0 660,633
Aug 13, 2010 Affiliate Activity 0 5,862,399

JPM Trading 3,278,295 8,284,104

Also, the buying by JPM Affiliates on Aug 13, 2010 was matched by additional buying and additional selling
by JPM of around 3 million shares. If the additional buying and selling represented trading churn to support
the accumulation for JPM Affiliates, then there is a chance that market on Aug 13 was also compromised.
Trading where other brokers have been used to accumulate shares and where trading churn has been used
to advance trading agendas would strongly suggest market fixing and perhaps requires a proper
investigation to clarify the situation.

SECURITIES LENDING SHARE FLOWS
The share flows in relation to the acounts of JP Morgan Group entities as detailed in the Aug 17, 2010
announcement were associated with:
buying and Selling activity; and
securities Lending transactions that included:
o Borrowed shares and the return of borrowed shares; and
o Loaned shares and the return of loaned shares.

The share flows all represent changes to the substantial holding.
Days where substantial buying for JPM
affiliates was facilitated by other brokers,
not their house broker JPM
The use of other brokers for the buying
undertaken by JPM affiliates potentially
creates insider knowledge that could result in
unfair trading and a compromised market.
54

The various share flows have all been summarized in the following table.

ASX ACTIVITY LENDING ACTIVITY BORROWING ACTIVITY
Sells Buys Loans Out Loan Returns Borrow Returns Borrows
OFF ON OFF ON OFF ON
3,585,367 24,732,646 20,727,739 1,188,594 1,859,855 20,899,000

The net share flows from all activities were as follows
OFF ON NET
26,172,961 46,820,240 20,647,279

The chart compares movements OFF the Register to movements ON to the Register for the various
activities. On balance, the bulk of the shares borrowed appear to have been loaned out to other entities,
with the net buying taking place on market providing the bulk of inflows that resulted in the Group
becoming a subtantial shareholder.

The borowing and lending activities undertaken by entities within the substantial shareholder group, and
the trading relationships (if any) to the counterparties involved with the securities lending transactions all
require proper clarification if the trading data is to be fully understood and an informed opinion can be
made about the fairness of trading.






0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
Buying & Selling Lending Borrowings
Volumes
Loans
Out
Loan
Return
s
Borrows
In
Borrow
Returns
Buys
Sells
Share Flows Associated with the JPM Substantial
Holder Notice Aug 17, 2010
55

7.4.3.2.20 SUBSTANTIAL NOTICE OCTOBER 4, 2010: Ceasing to be a substantial shareholder

JP Morgan ceased being a substantial holder on September 29, 2010 with the announcement being
released to the market on October 4, 2010.

The buying and selling by JPM Affiliates resulting in the holding falling below 5%, together with broker
buying and selling by JPM over the same period (i.e. Aug 16 to Sept 29, 2010) is summarized below.

Period Aug 16 to Sept 29, 2010 Sells Buys Net
JPM Affiliate Activities 42,470,987 35,426,772 -7,044,215
JPM Broker Trades 31,235,625 61,862,958 30,627,333

Buying by JPM ran at substantially higher levels than what was put through the market for JPM affiliates,
however they were clearly not responsible for all of the selling by JPM Affiliates. Other brokers were
involved for at least the shortfall which amounted to around 11.14 million shares.

There was an absence of securities lending transactions associated with the October 4 notice as shown in
the summary of all share movements below.
ASX ACTIVITY LENDING ACTIVITY BORROWING ACTIVITY
Sells Buys Loans Out Loan Returns Borrow Returns Borrows
OFF ON OFF ON OFF ON
42,470,987 35,426,772 0 460,855 0 0

The various activities resulted in the following net share flows with the holding falling under the 5%
substantial shareholder threshold.
OFF ON NET
42,470,987 35,887,627 -6,583,360

Other brokers assisting with the selling by JPM Affiliates and the possible churning of stock by broker JPM
as JPM Affiliates were disposing of stock again raise questions that have implications for market integrity.
Compounding any integrity issues was the fact that JPM hosted a Lynas Corporation Rare Earths
Presentation in New York on Sept 27 and Sept 28 as announced by the company on Sept 29. <LINK>, yet JPM
Affiliates ceased as a substantial shareholder on Sept 29, 2010. Curiously they also churned over 13 million
shares back and forth on Sept 22 on a day that JPM sold only 1.7 million shares and bought 96,295 shares.
The activities of the substantial shareholder group corresponding to the conference were as follows.
Date Entity Sells Buys Price
21-Sep-10 JPMSAL 150,000 - 1.28
22-Sep-10 JPMSAL 13,547,857 - 1.20
22-Sep-10 JPMSAL - 13,134,816 1.19
23-Sep-10 JPMSAL 85,948 - 1.24
23-Sep-10 JPMSAL - 246,178 1.22
24-Sep-10 JPMSAL - 100,000 1.23
27-Sep-10 JPMSAL - 251,148 1.28
28-Sep-10 JPMSAL 1,000,000 - 1.33
29-Sep-10 JPMSL 6,772,139 - 1.36
29-Sep-10 JPMSAL 4,424 - 1.36
29-Sep-10 JPMSAL - 294,736 1.32

JPM Affiliates sold 1 million shares at $1.33 during the presentation (Sept 28) and 6. 77 million shares at
$1.36 the day after. The share price closed at $1.275 immediately before the presentation on Friday Sept
24, 2010 and at $1.36 on Sept 30, 2010. The selling on behalf of JPM affiliates and others on Sept 28, and
29 appears to be a co-ordinated approach by insiders designed to capitalize on the positive presentations
that were being released to the market.
Sep 22, 2010 Trading
Sells Buys
JPM Affiliates 13,547,857 13,134,816
Broker Trades 1,701,000 96,295
Practically all buying and a majority
of selling was handled by brokers
other than JPM

Rare Earths Presentation

Affiliates net sold
while JPM net
bought
56

The leading brokers through the period Sept 27, 28 and 29 are listed below with JPM having a relatively
minor impact on trading. Any one of a number of brokers could have acted for the JPM Group and such co-
operation adds to the likelihood of co-operation/collusion during other trading periods as well.
Broker Sells Buys Net Market Share

Broker Net Buys
DMG 6,935,847 15,065,028 8,129,181 13.7%

DMG 8,129,181
MACQ 18,338,625 1,096,012 -17,242,613 12.1%

ITG 4,496,767
COMM 7,973,797 11,312,362 3,338,565 12.0%

COMM 3,338,565
CITI 6,669,845 9,623,780 2,953,935 10.1%

CITI 2,953,935
MERL 5,507,068 7,852,372 2,345,304 8.3%

MERL 2,345,304
BBY 5,294,623 5,245,444 -49,179 6.6%

MSDW 1,446,673
UBS 3,924,555 3,129,417 -795,138 4.4%

ETRD 1,424,642
ETRD 2,764,188 4,188,830 1,424,642 4.3%

SBAR 593,110
AIEX 2,418,543 2,600,150 181,607 3.1%

Broker Net Sells
ITG 0 4,496,767 4,496,767 2.8%

MACQ -17,242,613
INV 3,500,000 0 -3,500,000 2.2%

INV -3,500,000
GS 1,641,265 1,289,391 -351,874 1.8%

SUSQ -1,952,206
MSDW 612,404 2,059,077 1,446,673 1.7%

PSL -1,048,108
INST 1,341,806 1,107,211 -234,595 1.5%

UBS -795,138
CSUI 1,524,437 859,529 -664,908 1.5%

CSUI -664,908
JPM 1,359,419 740,389 -619,030 1.3%

JPM -619,030

7.4.3.2.21 FURTHER ANOMALIES ASSOCIATED WITH TRADING RECORDS FOR THE OCT 4, 2010 CEASING NOTICE
The high volume trading in Lynas by JPM Affiliates during days other than Sept 28 and Sept 29, 2010, (refer
below) tends to show a reliance on other brokers rather than their house broker to do their buying and
selling. The use of a mix of brokers rather than JPM makes monitoring the fairness of trading a very
difficult task as the volumes of buying and selling are quite substantial and broker identities are
camouflaged through the settlement process and in the way that changes to the register are recorded.

Importantly, the integration of buying and selling across a wide crossection of brokers by entities that
identify with the same group, could lead to levels of control that would equate to share price
manipulation. And unfortunately, the system as it stands cannot readily identify and react to the impact of
such trading.

There is also the issue of confusing signals given to the market by trading that at face value just doesnt
make sense, such as when 9 million shares are bought then sold in the market (not crossed) for the same
price which occurred on Aug 18, 2010.

A similar event occurred on Aug 30, 2010, when over 6 million shares were bought and sold at the same
average price and again did not involve crossings.


Sells Avg. Sells Buys Avg. Buys
Aug 18 JPM Affiliate Trades
9,193,045
$1.03
9,356,478
$1.03

JPM Broker Trades
3,384,443
$1.01
89,513
$0.98
Aug 30 JPM Affiliate Trades
6,650,000
$0.88
6,831,541
$0.88

JPM Broker Trades
78,933
$0.97
102,608
$0.99
Sept 22
JPM Affiliate Trades
13,547,857
$1.20
13,134,816
$1.19

JPM Broker Trades
1,701,000
$1.22
96,295
$1.21
The activities of JPM affiliates through a range of brokers rather than through its house broker JPM shows
how widespread their influence is and how their activity is mostly camouflaged from view. Also, extensive
levels of buying and selling washing through the market but not generating profits suggests that the
motivation for trading is strategic and perhaps designed to both control the market and to generate
commissions in favour of fund managers rather than profits for clients.
On all 3 days, the trading by
JPM affiliates involved other
brokers while JPM had only a
minor presence in the
market.
Only minor activity
by JPM at a time
JPM Affiliates
disposed of 7.5
million shares
Macquarie
appears as the
most likely broker
selling for JPM
Affiliates
57


Trading data for August 18 and September 22, 2010 where there were large numbers of trades by JPM
Affiliates put through the market by brokers other than JPM again draws attention to how their influence
over trading manifests and the likely spread of insider knowledge across a wide section of the market.
LEADING BROKERS - August 18, 2010
(JPM Affiliates: 9.1 M Sells & 9.4 M Buys)

LEADING BROKERS September 22, 2010
(JPM Affiliates: 13.5 M Sells & 13.1 M Buys)

Broker Sells Buys Net Buys Share %

Broker Sells Buys Net Buys Share %
MSDW 7,067,613 14,390,117 7,322,504 28.3%

MSDW 61,942 2,602,615 2,540,673 3.8%
COMM 4,009,692 4,676,166 666,474 11.5%

COMM 3,754,791 5,716,652 1,961,861 13.7%
CSUI 140,813 530,727 389,914 0.9%

MACQ 454,827 2,167,787 1,712,960 3.8%
MERL 1,235,979 1,415,806 179,827 3.5%

SUSQ 0 1,424,310 1,424,310 2.1%
PSL 91,000 264,642 173,642 0.5%

UBS 708,659 1,777,480 1,068,821 3.6%
WILS 10,000 171,737 161,737 0.2%

AIEX 608,832 1,232,049 623,217 2.7%
SBAR 3,000 114,000 111,000 0.2%

INST 73,851 535,113 461,262 0.9%
DAIW 0 40,000 40,000 0.1%

FOST 850,000 1,250,000 400,000 3.0%
SHAW 125,000 160,000 35,000 0.4%

BTIG 0 400,000 400,000 0.6%
IMCP 24,000 54,808 30,808 0.1%

CIMB 0 344,044 344,044 0.5%
MORR 1,210,971 1,235,971 25,000 3.2%

CSUI 108,914 388,645 279,731 0.7%
BELL 60,000 85,000 25,000 0.2%

BAIL 0 254,055 254,055 0.4%
JDV 0 22,000 22,000 0.0%

ETRD 1,806,820 1,941,071 134,251 5.5%
TPPM 137,817 159,498 21,681 0.4%

BBY 3,178,313 3,202,586 24,273 9.3%
Other 1,090,605 1,132,778 42,173 2.9%

Other 236,490 551,326 314,836 1.2%
Broker Sells Buys Net Sells Share % Broker Sells Buys Net Sells Share %
JPM 3,384,443 89,513 -3,294,930 4.6%

DMG 9,015,524 4,167,067 -4,848,457 19.2%
MACQ 3,088,919 1,071,666 -2,017,253 5.5%

CITI 5,719,657 2,906,727 -2,812,930 12.5%
DMG 5,093,618 3,698,685 -1,394,933 11.6%

JPM 1,701,000 96,295 -1,604,705 2.6%
AIEX 1,444,148 986,039 -458,109 3.2%

MACP 932,389 238,815 -693,574 1.7%
HUB24 824,000 369,000 -455,000 1.6%

PSL 517,000 134,600 -382,400 0.9%
ETRD 2,193,290 1,855,925 -337,365 5.4%

MERL 1,940,701 1,571,448 -369,253 5.1%
UBS 1,235,899 1,175,823 -60,076 3.2%

DAIW 305,612 0 -305,612 0.4%
CITI 1,992,274 1,885,630 -106,644 5.1%

BELL 334,150 56,325 -277,825 0.6%
BBY 1,517,739 1,434,207 -83,532 3.9%

SHAW 230,000 961 -229,039 0.3%
GS 773,945 635,819 -138,126 1.8%

SOSL 1,048,523 914,500 -134,023 2.9%
Other 1,186,266 285,474 -900,792 1.9%

Other 930,933 644,457 -286,476 2.3%

The data clearly shows the participation of a wide network of brokers along with JPM in attending to the
seemingly non-genuine buying and selling conducted for JPM affiliates. The term non-genuine refers to
the marginal changes to ownership that occurred as well as the loss-making or marginally profitable trades
that were involved in moving such large tranches of stock back and forth. It also suggests that trading may
have been compromised on these days under the weight of buying and selling that was applied by a major
group seemingly without effect.

In general, the use of algorithms with small parcels of shares continuously passing back and forth makes it
extremely difficult to ascertain what is actually taking place on a minute-by-minute basis. The following
theoretical scenario helps to put matters into perspective.

Assume that on Sep 22, 2010, the 13.1 million purchases by JPM Affiliates were transacted by MSDW,
COMM, MACQ, SUSQ, BBY and DMG and that the 13.5 million sales were transacted by DMG, CITI, JPM,
and COMM. And assume also that trading algorithms werent permitted. In such circumstances, the large
Bids and Offers by these brokers overhanging the market would look extremely manipulative particularly
as the orders represent the interests of a single substantial shareholder.

However with the use of algorithms across the spread of brokers, all facilitating a constant stream of small
trades passing back and forth, it helps to make a previously unacceptable situation look somewhat
innocuous. Of course trading on Sep 22 didnt just relate to one substantial shareholder churning stock,
making any attempt to monitor exactly what was playing out virtually impossible to interpret without audits.
58

There is also the issue that brokers receiving instructions from JPM affiliates, may have encouraged
insider trading by these brokers on their own behalf or for other clients, potentially resulting in additional
distortions to trading. Certainly JPM affiliates would have been considered as informed sources, given
their close connections to the company as substantial shareholders going back several years; furthermore
the announcement on June 28, 2010 <LINK> revealing that JPM had initiated coverage on Lynas
Corporation and the hosting of functions by JPM to promote Lynas would have conveyed that they knew a
lot about the Company.

7.4.3.2.22 CONCLUDING COMMENTS REGARDING JPM SUBSTANTIAL NOTICES
The substantial shareholder declarations by JP Morgan help to demonstrate the potential for market fixing,
collusion by brokers and entities, and even cartel activity to take place, all of which can avoid regulatory
scrutiny. The system of trading, settlements and the registration of trades seems to tolerate obfuscation and
behind the scenes dealings with a degree of nonchalance that inspires little confidence that markets can
trade with integrity. The system itself appears to be severely lacking as entities cannot be readily assessed in
terms of the extent of their involvement in the market compared to their impact on the register.
The use of multiple brokers carrying out strategic buying and selling for multiple entities who represent the
same group, all of which is done through trading algorithms, very definitely provides a mechanism for overt
control over the market. There can be no doubt that algorithms working seemingly inoffensively, deliver a
strategic advantage to the entities that use them.
Any retail orders that get in the way of the buying and selling of sophisticated investors can simply be dealt
with by making the necessary re-adjustments back in the market. Adjustments are likely to be pre-
programmed into algorithms to automatically execute if and when required. A case in point is trading in
CuDeco where despite institutional short selling and the capping of prices being a constant feature of
trading, the register shows that the company Buy Back ended up stripping shares from retail investors, not
institutions. Presumably, any shares bought by the Buy Back from institutional sellers forced those
institutions back into the market to retrieve the shares from genuine sellers, who happened to be retailers.
The situation points to non-genuine trading, or share price manipulation, as the selling orders of institutions
that were taken out by the Buy Back and subsequently re-purchased from the market, obviously werent
really for sale.
Trading behaviours such as capping the share price, accumulating stock or disposing of stock generally
depend on the strategic aims of sophisticated investors who because of their size and access to funds are the
major influences in the market. However, unfairly controlling trading outcomes to pursue corporate agendas
(through the use of algorithms), represents an issue not gaining any consideration in the current public
debate about High Frequency Trading (HFT). The current focus is on the trading disadvantages inflicted on
other participants, which are widely reported on. The current debate ignores the fact that if a company is
rendered undervalued by trading designed to suppress share prices, a successful takeover of a grossly
undervalued emerging company usually makes the effort very worthwhile.
Finally, and importantly, any potential for unfair activity as brought to attention by research is just that. Only
the regulator and only through thorough audits can such activity be properly identified and properly
classified as being in compliance with expectations for a fair and orderly market. One of the outcomes from
the recent High Court judgment in regard to the illegality of creating artificial pricing levels is that all trading
needs to be re-assessed as there is a very strong chance that the impact of algorithms in controlling pricing
levels unfairly has been completely over looked.
As for transparency, the processing of institutional buying and selling, which is by far the most dominant
presence in the market, is definitely opaque to all other market participants including regulators. It is an
issue that requires immediate attention given the often repeated claims at the highest level of fair
transparent and efficient markets. The research undertaken strongly suggests that investors are being
grossly misled by such claims.
59



Section 7.4.3 contd
LYNAS CORPORATION LTD SUBSTANTIAL SHAREHOLDER DISCLOSURES

7.4.3.3 MORGAN STANLEY INVESTMENT MANAGEMENT INC
60

7.4.3.3.1 MORGAN STANLEY NOTICE AUGUST 16, 2010: Change to substantial holding

An announcement to the market on Aug 16, 2010 declared an increase in ownership of the Morgan Stanley
International plc Group to 23.822 million shares which represented 9.61% of the voting rights in Lynas
Corporation. .Previously, the group controlled 7.7% of the register. The trading period associated with the
announcement was August 10, 2010 to August 12, 2010.

Similarly to Mitsubishi, the substantial shareholding consisted of multiple holdings registered across a
number of institutions. The details are included below where the familiar names HSBC Custody Nominees,
National Nominees, JP Morgan Nominees, Citi Global Market and Morgan Stanley itself all feature.

61

Once again, the spread of holdings appears to enable the potential for corporate trading objectives to be
met by the washing of shares through the market from multiple accounts. It is illegal for entities to buy
and sell shares to themselves (i.e., no change to beneficial ownership as occurs with wash sales). However
different entities belonging to the same shareholder group buying and selling to each other through
multiple brokers, but with shares flowing in and out of the accounts of other brokers through interaction
with algorithms, may represent a way to circumvent wash sale guidelines. The end result is that the group
holding often doesnt change significantly.
Such a scenario possibly helps to explain the constant trading churn that takes place in companies but
where there is minimal impact on registers. If this is an accurate summation of what is taking place with
Lynas and in trading in stocks across the ASX, it could be spelling out a level of control over the market
identifiable more with share price manipulation than a market trading with integrity.
In any case, the share flows associated with the Morgan Stanley Group (MSG), together with the buying
and selling of Morgan Stanley the broker (MSDW), were as follows in the period covered by the notice.
Period: Aug 10 to Aug 12, 2010 Sells Buys Net
Trades by Morgan Stanley Affiliates (MSG) 5,079,334 33,686,317 28,606,983
MSDW Broker Activity 5,760,435 2,680,656 -3,079,779

The patterns of trading are similar to that outlined with JP Morgan where substantial numbers of Affiliate
purchases have been put through other brokers, not broker Morgan Stanley (Code: MSDW). Here also,
Affiliates have been strong net buyers while broker MSDW has been a net seller. The trading appears at
mixed purposes and at face value could be interpreted as aiding the accumulation taking place.
The notice only covers 3 days of trading as per the following summary:



BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET BUYS SHARE
UBS 1,502,620 13,181,925 11,679,305 20.1%

BELL 4,942,500 121,070 -4,821,430 6.9%
GS 671,342 2,725,016 2,053,674 4.7%

PSL 3,860,160 30,500 -3,829,660 5.3%
AIEX 541,042 1,097,930 556,888 2.3%

MACQ 3,824,973 344,500 -3,480,473 5.8%
ETRD 1336015 1,646,625 310,610 4.1%

JPM 1,856,338 75,076 -1,781,262 2.7%
COMM 4,282,744 4,528,607 245,863 12.1%

INST 812,186 292,628 -519,558 1.5%
MACP 23,287 222,103 198,816 0.3%

HART 575,000 130,000 -445,000 1.0%
DMG 2563288 2,664,215 100,927 7.2%

MORR 100,000 0 -100,000 0.1%
MERL 401973 500,538 98,565 1.3%

AUST 100,000 0 -100,000 0.1%
CSUI 335,250 429,726 94,476 1.1%

INV 100,000 0 -100,000 0.1%
RBSM 25,000 111,300 86,300 0.2%

WILS 100,000 17,000 -83,000 0.2%
ORDS 34,300 101,311 67,011 0.2%

SOSL 364,000 304,000 -60,000 0.9%
HUB24 1,000,000 1,003,000 3,000 2.69%

ABNA 1,596,738 1,546,738 -50,000 4.3%
BBY 1343399 1,371,560 28,161 3.7%

CITI 1,126,009 1,119,727 -6,282 3.1%
MSDW 2,381,231 2,382,305 1,074 6.5%

TPPM 127,835 114,783 -13,052 0.3%
Others 292,317 367,677 75,360 0.9%

Others 316,875 106,562 -210,313 0.6%


AUG 10, 2010 Sells Buys
MSG trades 2,221,079 14,440,441
Broker MSDW 2,381,231 2,382,305

The selling by Affiliates may have been done by the House Broker MSDW
however the majority of buying looks to have been done through a mix of
brokers with UBS obviously responsible for a good portion of it.
The buying by broker MSDW on Aug 10 could have accounted for all of the selling by their affiliates (MSG) yet
only 283,750 shares were crossed. As such the trading appears somewhat non-genuine.

The influence of a range of other brokers on behalf of Morgan Stanley Affiliates (MSG) shows a connectedness
within the industry that would facilitate information leakage, or inside information, which happens to be one of
the arguments used in support of algorithms <LINK>.

Again there is also the possibility that trading churn by a number of brokers was also in support of the
accumulation taking place on behalf of affiliates but with trades netting out and having no impact on the register.
62

On August 11, 2010, (see below) either UBS or a range of brokers appear to have been active as buyers for
the Morgan Stanley Group.




BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET BUYS SHARE
UBS 820,935 4,038,261 3,217,326 10.33% BELL 4,246,867 27,025 -4,219,842 9.03%
MACQ 234,310 2,043,441 1,809,131 4.84% CSUI 1,030,198 436,379 -593,819 3.14%
COMM 2,992,240 3,601,504 609,264 13.93% MERL 473,212 186,915 -286,297 1.40%
INST 38,976 583,899 544,923 1.32% DMG 1,515,926 1,250,830 -265,096 5.89%
SUSQ 0 315,889 315,889 0.67% GS 634,847 423,875 -210,972 2.26%
HUB24 2,665,382 2,725,382 60,000 11.43% FOST 200,000 0 -200,000 0.42%
JPM 478,631 529,865 51,234 2.15% AIEX 719,646 554,163 -165,483 2.70%
ETRD 1,106,471 1,157,085 50,614 4.81% WILS 162,000 0 -162,000 0.34%
BRLL 520,000 570,000 50,000 2.31% MACP 125,000 6,000 -119,000 0.28%
CITI 1,366,496 1,394,149 27,653 5.89% ABNA 1,032,134 952,134 -80,000 4.21%
ORDS 44,563 60,000 15,437 0.22% BBY 1,537,808 1,468,894 -68,914 6.38%
CIMB 37,986 51,131 13,145 0.19% TPPM 322,336 262,528 -59,808 1.24%
SOSL 490,000 490,000 0 2.08% MSDW 228,167 211,626 -16,541 0.93%
Others 95,616 149,836 54,220 0.52% Others 441,064 70,000 -371,064 1.09%


Trading on Aug 12, 2010 suggests that UBS was again the major accumulator of stock for the Morgan
Stanley Group (MSG), while broker MSDW was the seller. Interestingly, UBS also sold a similar number of
shares to that purchased by MSDW Affiliates. UBS crossings represented 51.8% of all of their selling of
which 23.5 % (3.68 million shares) were portfolio crossings likely to be in favour of MSG affiliates.
The trading details were as follows.




BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET BUYS SHARE
COMM 4,864,097 7,910,849 3,046,752 14.92%

MSDW 3,151,037 86,725 -3,064,312 3.75%
UBS 15,667,221 16,483,715 816,494 37.53%

CSUI 1,749,417 519,708 -1,229,709 2.66%
JPM 66,631 808,117 741,486 1.03%

INST 865,920 66,624 -799,296 1.09%
ETRD 1,451,092 1,922,173 471,081 3.92%

SBAR 480,646 0 -480,646 0.56%
MINC 0 275,000 275,000 0.32%

BBY 3,230,361 2,849,275 -381,086 7.11%
MERL 244,568 515,878 271,310 0.89%

GS 708,857 443,288 -265,569 1.39%
DMG 2,482,137 2,732,665 250,528 6.07%

SOSL 545,500 315,000 -230,500 1.01%
MACQ 728,982 955,488 226,506 1.99%

HUB24 2,840,800 2,740,000 -100,800 6.52%
FOST 0 200,000 200,000 0.24%

BELL 95,200 5,000 -90,200 0.12%
AIEX 814,826 925,504 110,678 2.02%

CLSA 87,709 0 -87,709 0.10%
CITI 1,015,509 1,120,862 105,353 2.52%

BTIG 50,000 0 -50,000 0.06%
ABNA 865,004 945,004 80,000 2.10%

CARM 50,000 0 -50,000 0.06%
MACP 97,423 164,317 66,894 0.30%

AUST 30,000 0 -30,000 0.04%
TPPM 233,192 289,294 56,102 0.61%

IMCP 90,174 60,400 -29,774 0.18%
HART 50,000 75,000 25,000 0.14%

ORDS 148,063 134,650 -13,413 0.33%
Others 23,946 236,617 212,671 0.30%

Others 78,391 25,550 -52,841 0.12%


AUG 11, 2010 Sells Buys
MSG trades 22,142 3,590,122
Broker MSDW 228,167 211,626

Broker MSDW had a low profile in the market on August 11, 2010.
AUG 12, 2010 Sells Buys
MSG trades 2,836,113 15,655,754
Broker MSDW 3,151,037 86,725

If UBS were acting for the Morgan Stanley Group and they obviously had
access to selling to meet all of the MSGs buying requirements, there is the
question of why they didnt cross a larger amount of their selling rather
than deciding to put half of it through the market?
There is also the question of what impact UBS trading had on the market given their role as buyers and sellers,
and with inside information relating to the intentions of the Morgan Stanley Group not available to the rest of
the market, with the exception of broker MSDW.

63

7.4.3.3.2 MORGAN STANLEY NOTICE AUGUST 29, 2011: Change to substantial holding

The notice announced a fall in holding of the Morgan Stanley Substantial Group from 159.7 million shares
to 138.0 milion shares representing a fall in control over voting rights to 8.05%.

The holdings referred to in the announcement were as follows:

Reference Holder of Relevant Interest Registered Holder Shares
Account 1 Morgan Stanley & Co LLC Unknown 5,264,013
Account 2 Morgan Stanley & International plc. HSBC Nominees 4,123,773
Account 2 Morgan Stanley & International plc. Unknown 7,305,896
Account 2 Morgan Stanley & International plc. Unknown 124,082
Account 3 Morgan Stanley Australia Securities Morgan Stanley Nominees 540,931
Account 4 Morgan Stanley Investment Management Ltd HSBC Nominees 67,573
Account 5 Morgan Stanley Investment Management Inc. HSBC Nominees 101,406,409
Account 5 Morgan Stanley Investment Management Inc. JP Morgan Nominees 3,534,948
Account 5 Morgan Stanley Investment Management Inc. National Nominees 5,684,541
Account 5 Morgan Stanley Investment Management Inc. Citigroup Pty Ltd 1,165,667
Account 5 Morgan Stanley Investment Management Inc. JP Morgan Chase 86,371
Account 5 Morgan Stanley Investment Management Inc. HSBC Nominees 2,336,634
Account 5 Morgan Stanley Investment Management Inc. Hong Kong Shanghai Banking 238,908
Account 6 Morgan Stanley Smith Barney LLC Citi Global Markets 2,000

The trading behaviours notified and the structue of accounts once again draws attention to probity issues.
Certainly the registration of accounts through the major investment banks, who also hold shares on behalf
of other substantial shareholders, shows the connectedness of the financial industry with custodians
having access to an ocean of shares for securities lending purposes.

However the potential for control over the market afforded by multiple accounts representing a single
group cannot be ignored. The spread of holdings could readily be used to support any trading agendas
investment managers may have and whether or not trading agendas are supported through collusion is
precisely why audits need to be part of the regulatory response to ensure fair trading.

Possible collusion issues aside, the fact that multiple buy and sell orders can relate back to just one
shareholder group can cast doubts about the fairness of trading, particularly when algorithms make the
monitoring and reconciling of trades extremely difficult. The argument that if trading innovations cannot
be properly regulated then they shouldnt be introduced in the first place resonates extremely loudly.

For an entitity to sell out of one account and then to buy back at a later stage seems a reasonable thing to
do, and for another account to be used to do the same thing is probably reasonable as well. However when
the buying and selling is taking place simultaneously, with algorithms dispensing orders continuously, the
fairness of the activity on the market is much more difficult to assess. The situation is made all the more
difficult with spurious orders constantly appearing on trading screens, then disappearing, only to confuse
trading even further. It also demonstrates the extent of non-genuine trading activity that regulators dont
seem to have a problem with, even though it helps to destroy market integrity and to drive investors away
from the markets.

Trading on August 2, 2011 for example shows three of the Morgan Stanley accounts buying and selling to
generate the following changes to the substantial holding.

MSG Entities OFF ON NET
Account 2 1,348,915 501,000 -847,915
Account 4 341,473 87,325 -254,148
Account 5 2,415,831 0 -2,415,831
Totals 4,106,219 588,325 -3,517,894
The net result for the days trading is for
the substantial holding to reduce by 3.52
million shares
64

The trading activity of the House Broker (MSDW) and the Morgan Stanley Substantial Shareholder Group
(MSG) compare as follows:


Aug 2, 2011 OFF ON NET
MSG trades 4,106,219 588,325 -3,517,894
Broker MSDW 1,798,889 1,012,082 -786,807





The prominent brokers on Aug 2, 2011 were as follows:

BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET BUYS SHARE
CITI 5,241,297 7,737,636 2,496,339 12.2%

CLSA 4,895,650 0 -4,895,650 4.5%
COMM 17,461,457 18,523,542 1,062,085 33.8%

INV 1,354,887 0 -1,354,887 1.3%
DMG 4,650,211 5,576,700 926,489 9.6%

MSDW 1,798,889 1,012,082 -786,807 2.6%
ETRD 1,259,781 2,064,827 805,046 3.1%

MERL 759,274 202,867 -556,407 0.9%
MACP 114,675 786,838 672,163 0.8%

UBS 3,357,549 2,954,398 -403,151 6.0%
CSUI 241,245 842,616 601,371 1.0%

BELL 404,461 95,000 -309,461 0.5%
AIEX 861,824 1,417,254 555,430 2.1%

PSL 1,972,580 1,786,676 -185,904 3.5%
FWH 0 514,000 514,000 0.5%

SUSQ 107,663 0 -107,663 0.1%
BAIL 0 405,000 405,000 0.4%

SBAR 96,200 12,200 -84,000 0.1%
INST 93,350 396,194 302,844 0.5%

WILS 40,828 5,000 -35,828 0.0%
FOST 600,000 800,000 200,000 1.3%

SHAW 33,500 0 -33,500 0.0%
BTIG 80,000 180,000 100,000 0.2%

JPM 38,257 5,152 -33,105 0.0%
TPPM 550,000 607,215 57,215 1.1%

ITG 32,692 0 -32,692 0.0%
NAL 78,436 132,851 54,415 0.2%

MACQ 985,864 956,369 -29,495 1.8%
CARM 0 36,000 36,000 0.0%

AUST 26,000 0 -26,000 0.0%
Others 5,106,184 5,223,717 117,533 0.30%

Others 972,052 940,672 -31,380 1.8%


While some of the trading by Affiliates is associated with their House Broker MSDW the majority of sell
trades are opaque to the market. Possibilities for the selling include CLSA, COMM and DMG and/or a
combination of several brokers.

Once again, the fairness of the market would be impacted by any churning of shares by brokers acting for
affiliates of the Morgan Stanley Group but where trades netted out and didnt make it to the register. The
problem is that without audits there is no way of knowing about such activity. It highlights the challenges
faced by regulaters with so much opaque activity able to occur within the current regulatory framework .


Broker MSDW appears to have attended to the
buying of its affiliates although only 73,834 shares
were actually crossed. Yet it had access to selling
that would enable them fill the entire buying order
via a single crossing. Other brokers have clearly
been involved with their selling. The combination of
brokers involved in the net selling by Affiliates
again raises trading concerns
65

7.4.3.3.3 MORGAN STANLEY NOTICE OCTOBER 5, 2011: Change to substantial holding

Trading on Sept 26, 2011 raises collaboration issues with broker MSDW appearing to take the other side of
trading done by the Morgan Stanley Group. The Morgan Stanley Group was a net seller through a mix of
other brokers, while broker MSDW was likely to have acted for their purchases. The trades again look
dubious given the insider knowledge that would have been available to the House Broker and with
affiliates net selling while the House Broker was net buying.

Crossings by broker MSDW amounted to 1,997,269 shares, again casting doubts about the genuiness of
trading as MSDW had the capacity to cross 13.286 million of the sales made by affiliates yet the majority of
trades were put through the market. Other brokers appear to have sold at least 6 million shares for
Morgan Stanley Affilliates with COMM, CSUI and DMG all presenting as possible candidates, given their
trading profiles on Sept 26.

The overall effect appears to be a compromised market on Sept 26, 2011 with a range of brokers assisting
with both trading churn and net selling to service the needs of the substantial shareholder.

Sept 26, 2011 OFF ON NET
MSG trades 13,779,917 7,197,119 -6,582,798
Broker MSDW
7,707,941 13,286,987 5,579,046

BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET BUYS SHARE
MSDW 7,707,941 13,286,987 5,579,046 9.0% CSUI 6,793,212 2,788,009 -4,005,203 4.3%
MACP 910,434 2,278,994 1,368,560 1.4% MACQ 4,400,205 2,348,367 -2,051,838 3.1%
AIEX 3,006,115 4,098,484 1,092,369 3.1% UBS 3,976,410 2,254,993 -1,721,417 2.7%
INST 1,160,676 1,994,672 833,996 1.4% DMG 11,791,360 10,775,115 -1,016,245 10.0%
COMM 34,122,084 34,709,329 587,245 30.7% SUSQ 1,534,186 623,040 -911,146 0.9%
ETRD 5,265,285 5,842,149 576,864 5.0% BTIG 898,300 75,500 -822,800 0.4%
JPM 21,315 569,704 548,389 0.3% CIMB 3,226,708 2,726,708 -500,000 2.7%
HUB24 1,085,000 1,610,000 525,000 1.2% WILS 530,000 65,000 -465,000 0.3%
BBY 1,006,500 1,417,601 411,101 1.1% NAL 1,202,976 816,555 -386,421 0.9%
FOST 0 300,000 300,000 0.1% TIMR 702,136 369,272 -332,864 0.5%
PSL 388,000 626,182 238,182 0.4% INV 512,986 200,000 -312,986 0.3%
RBSM 523,898 736,300 212,402 0.6% GS 3,676,475 3,386,963 -289,512 3.2%
SBAR 15,700 200,000 184,300 0.1% RBC 132,000 0 -132,000 0.1%
MERL 82,864 216,788 133,924 0.1% CMCS 369,004 272,035 -96,969 0.3%
PERSH 1,381,023 1,477,023 96,000 1.3% TPPM 875,526 799,422 -76,104 0.7%
Others 13,883,350 14,439,511 556,161 12.7% Others 1,396,545 1,273,511 -123,034 1.2%

The transactions by entities belonging to the substantial shareholder group have been included below to
illustrate how buying and selling associated with multiple accounts, perhaps put through different brokers,
could easily lead to a compromised market. Only audits would stand a chance of determining if trading was
fair and reasonable or whether undue influence over the market may have distorted price discovery.


66

7.4.3.3.4 MORGAN STANLEY NOTICE JANUARY 11, 2012: Change to substantial holding
Trading on Dec 22, 2011 shows strong selling by MSG affiliates through other brokers, not the House
Broker MSDW whose presence in the market was subdued with an overall market share of just 2.3%. The
most likely brokers acting on behalf of the substantial shareholder include CITI, INV and COMM.


Dec 22, 2011 OFF ON NET
MSG trades
3,618,255 99,750 -3,518,505
Broker MSDW
232,234 268,709 36,475


BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET BUYS SHARE
UBS 323,027 1,397,315 1,074,288 7.7%

CITI 2,175,035 885,831 -1,289,204 13.8%
COMM 2,839,698 3,818,955 979,257 30.0%

INV 1,000,000 0 -1,000,000 4.5%
ETRD 199,593 576,682 377,089 3.5%

GS 886,518 255,959 -630,559 5.2%
SUSQ 6,559 307,351 300,792 1.4%

MACQ 532,048 207,108 -324,940 3.3%
AIEX 309,000 575,790 266,790 4.0%

DMG 1,052,899 879,178 -173,721 8.7%
INST 53,425 202,622 149,197 1.2%

BELL 110,000 0 -110,000 0.5%
MACP 9,000 107,000 98,000 0.5%

VIRT 381,205 340,677 -40,528 3.3%
BBY 259,710 339,065 79,355 2.7%

PSL 145,000 106,175 -38,825 1.1%
TPPM 7,800 63,998 56,198 0.3%

CIMB 62,453 27,232 -35,221 0.4%
MERL 178,296 233,595 55,299 1.9%

ORDS 138,168 112,000 -26,168 1.1%
HART 0 47,000 47,000 0.2%

CSUI 36,614 19,042 -17,572 0.3%
RBSM 0 39,635 39,635 0.2%

SOSL 25,000 10,000 -15,000 0.2%
CMCS 10,000 48,650 38,650 0.3%

IMCP 12,211 0 -12,211 0.1%
MSDW 232,234 268,709 36,475 2.3%

SHAW 10,828 0 -10,828 0.0%
CLSA 0 29,426 29,426 0.1%

D2MX 10,828 0 -10,828 0.0%
Others 80,828 188,982 108,154 1.2%

Others 0 0 0 0.0%

On Dec 5 and Dec 6, 2011 the substantial shareholder mostly sold its shares through other brokers and
looks to have re-purchased a large amount of them through their House Broker MSDW.
The movements of shares however appear to involve intermediaries purchasing shares from the market
including those sold by brokers for the substantial shareholder, and then re-selling them back into the market
where they have been picked up by MSDW and others. The buying patterns of MSDW on both days are
shown below.
The washing effect possibly enables the transactions to avoid being regarded as wash trades even
though substantial numbers of shares have ended up back with the substantial shareholder.
Dec 5, 2011 Sells Buys Net
MSG trades
2,180,252 1,702,034 -478,218
Broker MSDW
107,044 1,591,586 1,484,542
Dec 6, 2011
MSG trades
1,244,205 2,178,168 933,963
Broker MSDW
533,237 2,203,500 1,670,263


The constantly changing trading patterns by the
substantial shareholder, rotated through various
brokers and all cloaked by anonymity, with other
holders likely to be doing similarly, makes the task of
effective regulation extremely difficult.

Broker Volume %
COMM 556,480 25.3%
DMG 317,431 14.4%
CITI 250,092 11.3%
INST 124,633 5.7%
D2MX 114,914 5.2%
MACQ 110,286 5.0%
RBSM 74,520 3.4%
ETRD 64,170 2.9%
MSDW 57,345 2.6%
MERL 55,852 2.5%
WILS 49,380 2.2%
AIEX 48,000 2.2%
NAL 47,510 2.2%
UBSW 46,473 2.1%
BBY 45,410 2.1%
TIMB 41,743 1.9%
GS 37,037 1.7%
Other 162,224 7.4%
Totals
2,203,500 100.0%


Broker Volume %
COMM 460,938 29.0%
ETRD 389,033 24.4%
CITI 163,663 10.3%
GS 105,328 6.6%
BBY 83,644 5.3%
AIEX 82,719 5.2%
DMG 58,325 3.7%
CSUI 58,262 3.7%
UBSW 36,390 2.3%
TIMB 25,935 1.6%
TPPM 24,149 1.5%
MSDW 20,512 1.3%
SUSQ 16,454 1.0%
ORDS 12,600 0.8%
MACP 9,116 0.6%
NAL 9,070 0.6%
FOST 8,325 0.5%
Other 27,123 1.7%
Totals 1,591,586 100.0%

Dec 5, 2011 Dec 6, 2011
Sales by various brokers to MSDW
Casting further doubts about the genuiness of
trading and what was being achieved by the
churning of the MSG substantial holding, is the
fact that average selling prices were below the
average purchase prices as shown below.
2011
MSDW
Avg. Buy
MSDW
Avg. Sell
Dec-05 1.314 1.208
Dec-06 1.308 1.288

67

7.4.3.3.5 MORGAN STANLEY NOTICE NOVEMBER 14, 2012: Initial notice of substantial holding
The substantial shareholder notice announced on Nov 14, 2012 declared a substantial holding of
87,591,175 shares for ownership rights of 5.07% of the register. A transaction summary for the period
covered by the notice (i.e.; July 13 to Nov 12, 2012) is provided below.
BUYING & SELLING STOCK BORROWING COLLATERAL

NET SHARE FLOWS
OFF ON OFF ON OFF ON OFF ON NET
0 74,346,364 0 31,712,623 0 2,642,493

0 108,701,480 108,701,480

There are a number of issues concerning the disclosure which can be stated as follows.
Share flows amounting to 108.7 million shares appear to have moved into the control of the
substantial shareholder yet the announcement refers to a holding of 87.59 million shares.
Around 31.7 million shares were added through the borrowing of shares
Either no selling took place whatsoever or sales have been omitted from the disclosures covering
the 4 month period. Either scenario is extemely unusual.
Stock borrowing supports short selling but there were no sales recorded of any description.

MSDW broker trading over the same period is contrasted against the buying and selling activity of the
substantial holder Morgan Stanley Group as per the following table.

Period: Jul 13 to Nov 12, 2012 Sells Buys Net
MSG Trades 0 74,346,364 74,346,364 MSDW Crossings
MSDW Broker Activity 78,400,735 59,521,426 -18,879,309 25,992,489

Even allowing for cross trades where shares may have been transferred from other MSDW clients to the
substantial shareholder group, the results show that broker MSDW was a heavy net seller at the same time
the substantial holder accumulated a large holding. The situation is unlikely to be a coincidence and
requires clarification. The concern is that the market may have been compromised while the accumulation
of shares took place through the MSDW selling and also, possible churn trades put through other brokers
on behalf of the substantial shareholder Group that may have netted out and didnt make it to the register.
Analysis of trading data on particular days again helps to clarify the relationships between the substantial
shareholder and its House Broker MSDW as shown by the following examples.





BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET BUYS SHARE
RBSM 10,000 1,515,881 1,505,881 5.6% INV 1,500,000 0 -1,500,000 5.6%
UBS 109,773 1,236,765 1,126,992 5.0% DMG 1,493,859 390,587 -1,103,272 7.0%
MSDW 652,490 1,451,703 799,213 7.8% COMM 2,890,502 2,304,884 -585,618 19.3%
CITI 2,867,130 3,465,281 598,151 23.5% CSUI 504,011 157,915 -346,096 2.5%
VIRT 470,026 880,538 410,512 5.0% JPM 942,267 712,851 -229,416 6.2%
SUSQ 0 133,189 133,189 0.5% ETRD 344,745 132,919 -211,826 1.8%
PERSH 0 105,000 105,000 0.4% NATO 300,000 98,293 -201,707 1.5%
FWH 0 100,000 100,000 0.4% GETCO 159,567 0 -159,567 0.6%
AIEX 242,311 313,264 70,953 2.1% GS 348,547 246,289 -102,258 2.2%
ORDS 8,228 20,000 11,772 0.1% BBY 200,000 100,000 -100,000 1.1%
ABNA 182 9,157 8,975 0.0% MACQ 76,962 16,253 -60,709 0.3%
SHAW 0 2,027 2,027 0.0% BELL 60,000 0 -60,000 0.2%
ITG 20,127 20,127 0 0.1% TIMR 70,000 18,000 -52,000 0.3%
BTIG 20,000 20,000 0 0.1% Others 177,590 17,394 -160,196 0.7%
OCT 26, 2012 Sells Buys
MSG trades 0 5,208,773
Broker MSDW 652,490 1,451,703

Buying by Morgan Stanley Affiliates looks to have occurred partly through
MSDW but also with the aid of multiple brokers possibly including RBSM, UBS
and CITI. The accumulation strategy obviously involves multiple brokers as
buyers but multiple brokers could also have assisted the accumulation with
back and forth churn in an attempt to control the market. The situation
requires clarification. Investec and Deutsche were leading net sellers.
68




BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET BUYS SHARE
COMM 2,391,515 3,759,042 1,367,527 23.9% INV 1,500,000 0 -1,500,000 5.8%
MSDW 325,776 1,474,368 1,148,592 7.0% ETRD 1,908,942 690,661 -1,218,281 10.1%
VIRT 311,134 1,079,253 768,119 5.4% DMG 814,812 94,125 -720,687 3.5%
PSL 0 365,781 365,781 1.4% ITG 465,282 40,282 -425,000 2.0%
EVAN 0 300,952 300,952 1.2% UBS 1,102,159 816,529 -285,630 7.5%
FOST 0 201,000 201,000 0.8% CITI 1,754,074 1,522,957 -231,117 12.7%
AIEX 54,005 213,180 159,175 1.0% CSUI 472,343 338,984 -133,359 3.1%
SUSQ 46,132 120,389 74,257 0.6% JPM 114,246 0 -114,246 0.4%
CMCS 26,275 92,000 65,725 0.5% GS 634,954 548,066 -86,888 4.6%
MACP 89,900 155,057 65,157 1.0% ORDS 66,828 0 -66,828 0.3%
HART 100,000 160,000 60,000 1.0% MACQ 105,903 64,399 -41,504 0.7%
TPPM 1,368 55,343 53,975 0.2% NAL 39,131 1,038 -38,093 0.2%
INST 0 50,000 50,000 0.2% ABNA 23,487 185 -23,302 0.1%
WILS 0 45,000 45,000 0.2% NDAL 15,300 0 -15,300 0.1%
Others 492,992 674,221 181,229 4.5% D2MX 6,254 0 -6,254 0.0%






Again it is not know how much of the trading churn (if any) was conducted by the likes of CITI, DMG, BBY
etc. on behalf of the substantial shareholder with trades netting out and not making it to the register.
BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET BUYS SHARE
ETRD 223,748 1,498,244 1,274,496 7.4% JPM 2,552,627 91,169 -2,461,458 11.3%
COMM 2,644,297 3,221,584 577,287 25.1% MSDW 1,372,472 1,019,416 -353,056 10.3%
AIEX 57,070 567,698 510,628 2.7% DMG 1,036,406 797,722 -238,684 7.8%
HART 0 272,763 272,763 1.2% CITI 1,218,948 1,001,442 -217,506 9.5%
CMCS 31,550 304,034 272,484 1.4% GS 584,103 387,521 -196,582 4.2%
UBS 379,069 642,006 262,937 4.4% GETCO 193,923 17,675 -176,248 0.9%
PSL 93,779 257,900 164,121 1.5% VIRT 268,532 92,900 -175,632 1.6%
FWH 0 100,000 100,000 0.4% SUSQ 25,000 0 -25,000 0.1%
TPPM 28,517 124,616 96,099 0.7% CSUI 174,908 153,428 -21,480 1.4%
PERSH 7,500 100,000 92,500 0.5% MACQ 51,186 31,145 -20,041 0.4%
TIMR 200 92,129 91,929 0.4% RBSM 24,300 9,285 -15,015 0.1%
NATO 0 52,263 52,263 0.2% MERL 8,918 0 -8,918 0.0%
NAL 0 50,213 50,213 0.2% SOSL 14,000 13,000 -1,000 0.1%
BBY 505,090 506,490 1,400 4.3%
Others 165,451 256,951 91,500 1.8%


NOV 1, 2012 Sells Buys
MSG trades 0 3,709,332
Broker MSDW 325,776 1,474,368

Commonwealth and/or Virtu Financial look to have assisted Morgan
Stanley Group with their accumulation, along with broker MSDW.
CITI may also have assisted as a buyer despite being a net seller.
Investec were again the major seller of stock.
NOV 5, 2012 Sells Buys
MSG trades 0 4,297,250
Broker MSDW 1,372,472 1,019,416

Substantial levels of buying on behalf of the substantial shareholder
appears to be camouflaged within the retail brokers on Nov 5. MSDWs
net selling contradicts the accumulation taking place within the group;
although MSDWs activity comprised 863,324 cross trades, with 47%
of the crossings being centre point crossings involving JPM.
69




Cross trades by MSDW represented 265,388 buys and sells.
BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET BUYS SHARE
COMM 9,261,237 14,960,208 5,698,971 33.2% JPM 4,738,264 23,142 -4,715,122 6.5%
MSDW 1,160,730 4,899,504 3,738,774 8.3% ETRD 4,096,126 1,921,391 -2,174,735 8.3%
UBS 1,301,115 2,262,041 960,926 4.9% BTIG 1,400,000 0 -1,400,000 1.9%
NATO 41,501 717,842 676,341 1.0% PSL 875,000 137,000 -738,000 1.4%
CSUI 382,234 850,904 468,670 1.7% CITI 4,165,738 3,431,098 -734,640 10.4%
NAL 5,169 241,690 236,521 0.3% GS 1,039,279 493,405 -545,874 2.1%
AIEX 758,589 991,908 233,319 2.4% MACP 730,000 217,900 -512,100 1.3%
EURO 0 200,000 200,000 0.3% ITG 329,763 230 -329,533 0.5%
SOSL 220,891 341,691 120,800 0.8% MERL 315,556 18,880 -296,676 0.5%
MOELIS 0 100,000 100,000 0.1% CMCS 456,240 187,335 -268,905 0.9%
FOST 0 100,000 100,000 0.1% MORR 1,025,000 1,005,000 -20,000 2.8%
WILS 20,000 106,000 86,000 0.2% BBY 425,000 221,250 -203,750 0.9%
D2MX 0 25,000 25,000 0.0% GETCO 180,038 51,213 -128,825 0.3%
TIMR 63,308 87,231 23,923 0.2% VIRT 841,401 742,110 -99,291 2.2%
DMG 400,224 416,660 16,436 1.1% MACQ 1,122,838 1,025,608 -97,230 2.9%
Others 502,694 548,488 45,794 1.4% Others 622,770 155,976 -466,794 1.1%

The patterns of buying and selling accompanying the accumulation of shares by the Morgan Stanley Group
suggest a strategic and possibly unfair approach to trading for the following reasons:
The accumulation by Morgan Stanley Affiliates contrasts with a degree of selling by their house
broker MSDW which could be interpreted as an attempt to artificially influence the market;
Accumulation by the substantial shareholder through multiple brokers while other brokers engage
in back and forth trading churn could also suggest attempts to control the market in support of the
accumulation taking place.
Again, the overriding concern is that there is no way of knowing what has actually occurred with trading
without the auditing of accounts, and such steps dont form part of the regulatory response to anomalous
trading data.
7.4.3.3.6 MORGAN STANLEY NOTICE NOVEMBER 15, 2012: Ceasing as a substantial shareholder
Morgan Stanleys status as a substantial shareholder only lasted one day as per the substanttial
shareholder notice announced to the market on Nov 15, 2012. The transactions that reduced the holding
below the 5% threshold occurred on Nov 13, 2010 and have been summarized below together with a
comparison of broker trades by MSDW.
BUYING & SELLING STOCK BORROWING
OFF ON OFF ON
5,823,977 1,712,886 1,000,000 0

Nov 13, 2010 Trading Sells Buys Net
MSG trades 5,823,977 1,712,886 -4,111,091
MSDW Broker Activity (MSDW) 1,375,444 1,669,099 293,655
NOV 12, 2012 Sells Buys
MSG Group 6,130,401
Broker MSDW 1,160,730 4,899,504

The substantial levels of buying by Morgan Stanley interests on Nov
12, 2012 looks to have been facilitated by their broker MSDW in
conjunction with buying camouflaged within Commonwealth Scurities.
70

The involvement of other brokers with selling on behalf of the Morgan Stanley Group (MSG) with broker
MSDW churning stock and/or buying for affiliates, again suggests the possibility of double dealing or
market fixing in support of MSG entities.
Trading details for Nov 13 were as follows.






BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET BUYS SHARE
COMM 6,548,807 15,235,795 8,686,988 23.4% JPM 7,844,913 92,118 -7,752,795 8.5%
ETRD 538,721 3,447,997 2,909,276 4.3% CSUI 7,347,314 3,745,200 -3,602,114 11.8%
AIEX 627,628 2,853,035 2,225,407 3.7% UBS 4,720,725 2,989,185 -1,731,540 8.3%
DMG 204,763 1,771,699 1,566,936 2.1% VIRT 1,526,558 163,328 -1,363,230 1.8%
NATO 35,000 996,975 961,975 1.1% MERL 1,312,735 23,919 -1,288,816 1.4%
PSL 629,042 1,198,820 569,778 2.0% BAIL 1,200,000 10,000 -1,190,000 1.3%
MSDW 1,375,444 1,669,099 293,655 3.3% MACQ 1,930,488 909,213 -1,021,275 3.0%
FOST 126,337 376,337 250,000 0.5% GS 1,787,072 926,938 -860,134 2.9%
CMCS 59,350 289,334 229,984 0.4% WILS 400,000 21,000 -379,000 0.5%
ORDS 5,828 215,000 209,172 0.2% CITI 4,046,837 3,871,597 -175,240 8.5%
MORR 500,000 700,000 200,000 1.3% SBAR 100,000 26,172 -73,828 0.1%
EURO 0 200,000 200,000 0.2% PERSH 121,644 92,000 -29,644 0.2%
TIMR 34,000 211,918 177,918 0.3% Other nil
SUSQ 430,757 605,434 174,677 1.1%
BELL 106,113 230,000 123,887 0.4%
MACP 30,500 148,044 117,544 0.2%
SOSL 1,048,615 1,156,615 108,000 2.4%
BBY 1,044,692 1,151,050 106,358 2.3%
BTIG 560,000 560,000 0 1.3%
Other 323,512 679,573 356,061 1.1%



NOV 13, 2012 Sells Buys
MSG trades 5,823,977 1,712,886
Broker MSDW 1,375,444 1,669,099

Cross trades by MSDW only
involved 73,831 shares despite
access to the buying orders of the
substantial shareholder.
A number of brokers could have been involved in selling for MSG
affiliates with the likley candidates including JPM, CSUI, UBS and
COMM. Retail brokers were generally net buyers however with
retail investors generally tapped out and frustrated with the long
wait for Lynas projects to come to fruition, it doesnt make sense
that they would be strong buyers. If the buying was institutional not
retail, the data trends on Nov 13 suggest a somewhat contrived and
possibly unfair market.
71

7.4.3.3.7 FURTHER TRADING COMPARISONS FOR MORGAN STANLEY SUBSTANTIAL SHAREHOLDER NOTICES
The following data summaries feature high volume share flows from a range of Morgan Stanley Group
substantial shareholder notices and compare broker activity by MSDW to the activity of Morgan Stanley
Group affiliates. The data provides further clarity about issues with trading that may reflect on unfair
trading practices. The links to substantial shareholder notices are provided in each case.
a. AUG 10, 2010 TRADING FROM THE AUG 16, 2010 SUBSTANTIAL NOTICE <Link: PDF>






BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET BUYS SHARE
UBS 1,502,620 13,181,925 11,679,305 20.1%

BELL 4,942,500 121,070 -4,821,430 6.9%
GS 671,342 2,725,016 2,053,674 4.7%

PSL 3,860,160 30,500 -3,829,660 5.2%
AIEX 541,042 1,097,930 556,888 2.3%

MACQ 3,824,973 344,500 -3,480,473 5.8%
ETRD 1,336,015 1,646,625 310,610 4.1%

JPM 1,856,338 75,076 -1,781,262 2.7%
COMM 4,282,744 4,528,607 245,863 12.1%

INST 812,186 292,628 -519,558 1.5%
MACP 23,287 222,103 198,816 0.3%

HART 575,000 130,000 -445,000 1.0%
DMG 2,563,288 2,664,215 100,927 7.2%

MORR 100,000 0 -100,000 0.1%
MERL 401,973 500,538 98,565 1.3%

AUST 100,000 0 -100,000 0.1%
CSUI 335,250 429,726 94,476 1.1%

INV 100,000 0 -100,000 0.1%
RBSM 25,000 111,300 86,300 0.2%

WILS 100,000 17,000 -83,000 0.2%
Other 5,051,247 5,225,853 174,606 14.0%

Other 3,531,457 3,191,810 -339,647 9.2%



b. AUG 11, 2010 TRADING FROM THE AUG 16, 2010 SUBSTANTIAL NOTICE <Link: PDF>





BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET BUYS SHARE
UBS 820,935 4,038,261 3,217,326 10.3%

BELL 4246867 27025 -4,219,842 9.0%
MACQ 234,310 2,043,441 1,809,131 4.8%

CSUI 1030198 436379 -593,819 3.1%
COMM 2,992,240 3,601,504 609,264 13.9%

MERL 473212 186915 -286,297 1.4%
INST 38,976 583,899 544,923 1.3%

DMG 1515926 1250830 -265,096 5.9%
SUSQ 0 315,889 315,889 0.7%

GS 634847 423875 -210,972 2.3%
ETRD 1,106,471 1,157,085 50,614 4.8%

FOST 200000 0 -200,000 0.4%
BRLL 520,000 570,000 50,000 2.3%

AIEX 719646 554163 -165,483 2.7%
JPM 478,631 529,865 51,234 2.2%

WILS 162000 0 -162,000 0.3%
HUB24 2,665,382 2,725,382 60,000 11.4%

MACP 125000 6000 -119,000 0.3%
SOSL 490,000 490,000 0 2.1%

PSL 98744 10000 -88,744 0.2%
Other 1,544,661 1,655,116 110,455 8.8%

Other 3,462,765 2,955,182 -507,583 13.6%
AUG 10, 2010 Sells Buys Net
MSG trades 2,221,079 14,440,441 12,219,362
Broker MSDW 2,381,231 2,382,305 1,074

Crossings by MSDW totalled only 283,750 shares
which is unusual given the access by the House
Broker to the large quantity of buying undertaken
by the substantial shareholder

Trading on Aug 10 showed broker MSDW churning
substantial volumes of stock as MSG affiliates strongly
accumulated shares through other brokers. The trading by
MSDW is likely to have supported the buying of its affiliates
but the possible impact on the market through their
churning activities is difficult to assess.

UBS appears to be the active buyer on behalf of the
Morgan Stanley Substantial Shareholder Group.
AUG 11, 2010 Sells Buys Net
MSG trades 22,142 3,590,122 3,567,980
Broker MSDW 228,167 211,626 -16,541


MSDW didnt put through any crossings on
Aug 11, 2010.

Trading on Aug 11, 2010 showed broker MSDW
virtually absent from the market while other brokers
accumulated shares for MSG affiliates.
UBS again appears to be the active buyer on behalf of
the Morgan Stanley Group. The use of other brokers
for the trading of the substantial shareholder is a
notable feature of all trading by the group.
The trading churn by MSDW with 2.381 million sales and 2.382 million buys resulting in only 1,074
shares net bought, falls within the group designated by other brokers who were all small net buyers.
The market share of broker MSDW actually ranked 4
th
overall on Aug 10, 2010
72

c. AUG 12, 2010 TRADING FROM THE AUG 16, 2010 SUBSTANTIAL NOTICE <Link: PDF>





BROKER SELLS BUYS NET BUYS SHARE BROKER SELLS BUYS NET BUYS SHARE
COMM 4,864,097 7,910,849 3,046,752 14.9% MSDW 3,151,037 86,725 -3,064,312 374.7%
UBS 15,667,221 16,483,715 816,494 37.5% CSUI 1,749,417 519,708 -1,229,709 266.0%
JPM 66,631 808,117 741,486 1.0% INST 865,920 66,624 -799,296 109.0%
ETRD 1,451,092 1,922,173 471,081 3.9% SBAR 480,646 0 -480,646 56.4%
MINC 0 275,000 275,000 0.3% BBY 3,230,361 2,849,275 -381,086 711.1%
MERL 244,568 515,878 271,310 0.9% GS 708,857 443,288 -265,569 138.8%
DMG 2,482,137 2,732,665 250,528 6.1% SOSL 545,500 315,000 -230,500 100.6%
MACQ 728,982 955,488 226,506 2.0% HUB24 2,840,800 2,740,000 -100,800 652.3%
FOST 0 200,000 200,000 0.2% BELL 95,200 5,000 -90,200 11.7%
AIEX 814,826 925,504 110,678 2.0% CLSA 87,709 0 -87,709 10.2%
Other 2,285,074 2,831,094 546,020 6.0% Other 446,628 220,600 -226,028 0.8%



d. THE JULY 16, 2010 SUBSTANTIAL NOTICE <Link: PDF>
The notice was an initial holder notice for the Morgan Stanley Substantial Shareholder Group spanning the
period Mar 15, 2010 to Jul 14, 2010 and declaring a holding of 84.25 million shares. The trading of the
substantial holder as declared in the notice was actually higher at 85.3 million shares. Their trading details
and the trading undertaken by their House Broker MSDW over the same period were as follows:
Mar 15, 2010 to Jul 14, 2010 Sells Buys Net
MSG trades 0 85,275,973 85,275,973
MSDW Broker Activity 56,379,043 101,010,303 44,631,260

The notice also showed share flows to the substantial holder of 3.8 million shares that were the result of
securities lending transactions making the substantial holding close to 88 million shares not 84.25 million.
The notice is similar to what occurred with the substantial shareholder notice of Nov 2012 (Refer Section
7.4.3.3.5) where 74.35 million shares were purchased by the substantial shareholder without one share
being declared as sold, even though the House Broker MSDW sold 78.4 million shares.
Combining the two notices yields the following extraordinary trading figures associated with the dealings
of the Morgan Stanley Substantial Holder and its House broker. The data only relates to activity in the
market between Mar 15 & July 14, 2010 and July 13 & Nov 12, 2012 and doesnt include securities lending
transactions which saw an additional 38.2 million shares move under the control of the group.
Refer Notices Jul 16 2010 and Nov 14, 2012 Sells Buys Net
MSG trades 0 159,622,337 159,622,337
Corresponding MSDW Broker Activity 134,779,778 160,531,729 25,751,951
AUG 12, 2010 Sells Buys Net
MSG trades 2,836,113 15,655,754 12,819,641
Broker MSDW 3,151,037 86,725 -3,064,312

Crossings by MSDW totalled 46,707 shares

Broker MSDW was an active seller in contrast to the
solid accumulation of stock by the substantial holder
taking place through other brokers.The activity is
again contradictory and looks be in support of the
buying by MSG affiliates.

UBS again looks likely to be the main buyer on behalf
of Morgan Stanley Group affiliates, perhaps aided by
Commonwealth Securities.
Not 1 share was declared
as sold while 160 mill buys
were made. Broker MSDW
was a strong net buyer.
73

e. MAY 19, 2010 TRADING FROM THE JULY 16, 2010 SUBSTANTIAL NOTICE: <Link: PDF>






BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET BUYS SHARE
DMG 377,349 5,332,347 4,954,998 11.2% CIMB 3,138,203 35,539 -3,102,664 6.2%
INST 121,595 2,503,880 2,382,285 5.1% GS 2,381,089 146,352 -2,234,737 5.0%
MSDW 12,099,631 12,867,923 768,292 49.0% COMM 2,714,924 525,600 -2,189,324 6.3%
AIEX 28,200 612,979 584,779 1.26% CSUI 927,728 208,813 -718,915 2.2%
ETRD 308,534 684,194 375,660 2.0% UBS 764,000 281,195 -482,805 2.0%
IMCP 73,141 214,463 141,322 0.6% CITI 530,633 181,129 -349,504 1.4%
MACQ 86,489 225,147 138,658 0.6% MERL 269,656 110,716 -158,940 0.8%
TIMR 800 121,418 120,618 0.2% PSL 90,000 0 -90,000 0.2%
ABNA 749,867 801,095 51,228 3.0% SBAR 66,600 0 -66,600 0.1%
HART 20,000 50,000 30,000 0.1% RBSM 55,500 0 -55,500 0.1%
Other 0 57,714 57,714 0.1% Other 714,721 558,156 -156,565 2.6%



f. MAY 20, 2010 TRADING FROM THE JULY 16, 2010 SUBSTANTIAL NOTICE: <Link: PDF>






BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET BUYS SHARE
DMG 763,415 5,531,402 4,767,987 14.4% COMM 2,862,930 683,502 -2,179,428 8.1%
MSDW 4,564,409 6,017,683 1,453,274 24.2% EURO 1,989,126 0 -1,989,126 4.6%
MACQ 1,247,419 2,328,383 1,080,964 8.1% CSUI 998,806 240,345 -758,461 2.8%
BBY 1,514,702 1,853,375 338,673 7.7% CIMB 685,898 47,121 -638,777 1.7%
CITI 577,603 738,094 160,491 3.0% AIEX 648,116 101,000 -547,116 1.7%
GS 959,736 1,110,468 150,732 4.7% JPM 553,155 11,010 -542,145 1.3%
HART 0 100,000 100,000 0.2% PSL 428,405 0 -428,405 1.0%
INST 378,853 468,219 89,366 1.9% ETRD 326,858 93,171 -233,687 1.0%
TIBRA 3,466 64,938 61,472 0.2% D2MX 227,500 0 -227,500 0.5%
CMCS 0 56,100 56,100 0.1% MERL 386,139 172,984 -213,155 1.3%
Other 180,000 217,698 37,698 0.9% Other 2,582,823 2,043,866 -538,957 10.5%


MAY 19, 2010 Sells Buys Net
MSG trades 0 11,383,438 11,383,438
Broker MSDW 12,099,631 12,867,923 768,292

Crossings by MSDW totalled 10,274,586 shares

Broker MSDW was prominent in trading on May 19 however
the 11.38 million shares acquired for MSG affiliates compares
to 10.275 million crossings put through the market by broker
MSDW.
It would be of particular interest to determine who the
client(s) were associated with the cross trades and what
strategic links they might have had with the substantial
holder.
The buying of broker MSDW accounts for all the accumulation
announced by the Morgan Stanley Group. Broker MSDW
obviously had access to sellers of LYC stock as 59% of their
sales were crossings.
Whether or not the balance of selling was in support of
accumulation by the substantial shareholder, along with any
churn through other brokers that may also have aided in
controlling prices while accumulation was taking place is a
complete unknown.
MAY 20, 2010 Sells Buys Net
MSG trades 0 6,017,683 6,017,683
Broker MSDW 4,564,409 6,017,683 1,453,274

Crossings by MSDW totalled 2,730,139 shares

74


g. JUN 8, 2010 TRADING FROM THE JULY 16, 2010 SUBSTANTIAL NOTICE: <Link: PDF>







BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET BUYS SHARE
UBS 5,222,936 6,068,492 845,556 51.4%

MACQ 1,652,882 254,687 -1,398,195 8.6%
DMG 459,062 865,361 406,299 6.0%

COMM 769,014 263,140 -505,874 4.7%
AIEX 363,837 536,139 172,302 4.1%

MERL 194,096 26,745 -167,351 1.0%
ITG 0 171,562 171,562 0.8%

INST 43,551 0 -43,551 0.2%
HART 0 160,000 160,000 0.7%

JDV 40,000 0 -40,000 0.2%
ORDS 0 140,000 140,000 0.6%

GS 183,874 167,039 -16,835 1.6%
ETRD 80,000 210,199 130,199 1.3%

ABNA 644,924 629,381 -15,543 5.8%
CITI 478,461 561,733 83,272 4.6%

MACP 10,000 1,500 -8,500 0.1%
IMCP 52,870 82,423 29,553 0.6%

SBAR 23,500 16,500 -7,000 0.2%
MSDW 34,365 34,500 135 0.3%


Other 766,396 830,367 63,971 18.5%

Other 0 0 0 0.0%

h. JUL 14, 2010 TRADING FROM THE JULY 16, 2010 SUBSTANTIAL NOTICE: <Link: PDF>





Trading churn by the likes of ABN Amro on Jul 14 again highlights the impact that such trading may have on
the market perhaps in support of the objectives of the substantial shareholder. If client buying and selling
within brokers such as ABN Amro nets out it wont have an impact on the register and is difficult to account
for without audits. It would be of particular interest however to ascertain who such clients represented with
their trading as only then could proper assesments be made about the fairness of trading.
BROKER SELLS BUYS NET BUYS SHARE

BROKER SELLS BUYS NET BUYS SHARE
MSDW 3,819,746 9,586,059 5,766,313 19.2%

COMM 10,141,033 4,455,498 -5,685,535 20.7%
RBC 0 5,000,000 5,000,000 7.1%

UBS 2,904,211 217,661 -2,686,550 4.5%
AUST 50,000 1,900,000 1,850,000 2.8%

ETRD 3,300,819 1,040,907 -2,259,912 6.2%
GS 54,264 306,951 252,687 0.5%

BELL 477,952 15,000 -462,952 0.7%
CSUI 436,525 613,332 176,807 1.5%

DAIW 401,946 0 -401,946 0.6%
DMG 700,894 857,059 156,165 2.2%

MACP 380,125 25,000 -355,125 0.6%
SBAR 4,000 158,500 154,500 0.2%

PSL 471,372 146,100 -325,272 0.9%
HART 90,000 215,000 125,000 0.4%

MACQ 548,387 243,495 -304,892 1.1%
WILS 171,500 285,000 113,500 0.6%

AIEX 2,299,205 2,024,599 -274,606 6.2%
BBY 1,848,430 1,942,069 93,639 5.4%

MERL 472,000 254,741 -217,259 1.0%
Other 3,382,439 3,652,334 269,895 25.0%

Other 3,163,448 2,178,991 -984,457 7.6%
Trading on Jun 8 again demonstrates the cooperation that
takes place between brokers where on a day when MSDW
were virtually absent from the market, UBS looks to have
stepped in to attend to the buying for the Morgan Stanley
substantial shareholder group.
However on this occasion crossings by UBS represents 98% of
their sales for the day with the crossings likely to have ended
up with the MSDW Group.
JUN 8, 2010 Sells Buys Net
MSG trades 0 6,039,732 6,039,732
Broker MSDW 34,365 34,500 135

UBS were the active trader on Jun 8 with most of
their trades represented by crossings.

Crossings by UBS totalled 5,136,882 shares


JUL 14, 2010 Sells Buys Net
MSG trades 0 9,566,059 9,566,059
Broker MSDW 3,819,746 9,586,059 5,766,313

Crossings by MSDW totalled 1,422,641
shares.

The buying of broker MSDW appears to be on behalf of MSG
affiliates with crossings amounting to 15% of its trades and with
UBS strangely absent as a buyer on this occasion.

Broker ABN Amro also appears to have played a role in washing
shares through the market with 2.536 million sales and 2.536
million buys. Their trading makes up a large part of the net buys
listed as Other. Their activity is particularly curious as their
average sell was 67.8 cents while their average buy was 68.01
cents.
75

7.4.3.3.8 SECURITIES LENDING INSIGHTS FROM THE AUGUST 16, 2010 SUBSTANTIAL NOTICE: <Link: PDF>
Involvement with securities lending by the Morgan Stanley Group featured in the becoming a substantial
shareholder notice of Section 7.4.3.3.5 where stock borrowings amounted to 31.7 million shares and again
in Section 7.4.3.3.6 where 1 million shares were returned.
Issues concerning short selling securities lending are little understood by a majority of investors.
Fortunately the substantial notice on Aug 16, 2010 included a Prime Broker Agreement which helped to
convey how the system works. Part of the agreement which refers to collateral is reproduced below.

The essence of the agreement in regards to collateral seems to suggest that assets advanced as collateral
to secure loans when shares are lent out, then become the property of the lender. The lender then looks to
be entitled to use the collateral assets until such time that the loans are repaid.
As the wording suggests, collateral assets can be:
loaned out, (e.g., used to facilitate further shorting);
pledged, (e.g., used as assets to support further lending);
repoed (i.e.; a repurchase agreement is when securities are sold with a promise to buy them back at
a future time);
Hypothecated (i.e.; a pledge as security to support lending, where the lender can take charge of the
assets in the case of default); and,
Re-hypothecated (i.e.; when a broker re-uses customer-pledged collateral to back the broker's own
trades and borrowings).
All terms involve the use of assets advanced as collateral in support of stock loans, to pursue further
lending or borrowing activity. It represents a situation that has been described variously as borrowings on
top of borrowings or leverage on steroids.
The Prime Broker Agreement provides insights into the securities lending industry where exposures are
seen to be able to grow at exponential rates. As a result, there exist strong incentives to manage or control
pricing levels to facilitate:
control over exposed lending positions by attempting to limit price rises in stocks that have been
sold short.
control over the value of collateral advanced to support borrowings, by attempting to limit price
falls in the stocks put forward as collateral.
control over the prices of stocks targeted by short selling to enhance the likelihood of success of a
short selling campaign by driving prices lower, and limiting price rises when covering is attempted.
It also appears to be the case that the levels of control itemized above couldnt take place seamlessly, like
it appears to, without the collusion and co-operation of like-minded brokers and fund managers.
76

7.4.3.3.9 CONCLUDING COMMENT:
It would appear that complex systems have been put in place to support trading innovations such as:
Securities lending and short selling;
Highly leveraged investment products;
High frequency trading programs and the widespread use of trading algorithms by sophisticated
investors;
Dark pool trading venues;
Multiple exchanges; and,
Exotic investment products including derivatives, index tracking investments, warrants, mini
warrants CFDs and the like.

At the same time, markets have evolved in such a way where it is extremely difficult to make certain
entities accountable for their trading actions. It is also difficult to reconcile their trading with the impact
they have on the registers of the companies they target. Their trading behaviours at face value certainly
appear to be highly dubious and deserving of proper investigation.

The results of hastily implemented trading innovations, combined with an overly flexible trading and
settlement environment, seems to have made it virtually impossible to properly regulate trading under
current arrangements. Research into trading data has certainly shown that the system has sanctioned all
sorts of trading behaviours that look to have facilitated unfair control over the market and the creation of
artificial share prices.

It possibly comes as no surprise to discover that the current trading system has evolved primarily at the
behest of the worlds most powerful sophisticated investors, represented by the too big to fail investment
banks. Their modus operandi has been to lobby congress and Wall Street to be able to implement changes
in the way markets are able operate, and once they are introduced to Wall Street, the biggest stage in the
World, the new systems are then exported to stock exchanges around the globe where they seem to be
accepted without question.
Unfortunately, the same large banking organizations were behind the securitization and successful
marketing of toxic sub-prime mortgages that laid the foundations for the Global Financial Crisis. Their TOO
BIG TO FAIL status resulted in billions of dollars of tax payer funded bailout funding, and their
involvements in world markets has now created problems that are TOO BIG TO IGNORE. The problems
threaten the very existence of our financial markets which no longer appear capable of being able to
function in the way they were originally intended.
The extent of trading anomalies and the widespread use of trading behaviours likely to be generating
artificial pricing levels in Lynas Corporation, have enormous implications for market integrity. It represents
a situation where the recent clarification by the High Court on what constitutes illegal market
manipulation, suggests that the market has been allowed to operate for a very long time without proper
regulatory oversight in place.
The research findings suggest that a comprehensive review of all trading is urgently needed.

77


Section 7.4.3 contd
LYNAS CORPORATION LTD SUBSTANTIAL SHAREHOLDER DISCLOSURES

7.4.3.4 MERRILL LYNCH & CO INC.
78

7.4.3.4.1 MERRILL LYNCH SUBSTANTIAL NOTICE JANUARY 17, 2008: Becoming a substantial shareholder.
Merrill Lynch & Co became a substantial holder on Jan 8, 2008 as per advice released to the market on Jan
17, 2008 <LINK> . The announcement incorrectly stated the date for becoming a substantial shareholder as
Jan 8, 2007 however the remarkable feature of the disclosure was that it was triggered solely by securities
lending share flows. Surprisingly, there wasnt any buying and selling declared by the substantial
shareholder for the entire period covered by the notice which was from Sept 6, 2007 up until Jan 8, 2008.
The securities lending share flows to and from Merrill Lynch & Co. accounts were associated with:
Stock Lending i.e., Merrill Lynch Affiliates lending out LYC shares and subsequently receiving
them back when loans were repaid;
Stock Borrowing, i.e., Merrill Lynch borrowing LYC from other entities and subsequently
returning it;
Collateral arrangements such as:
o Merrill Lynch receiving LYC shares as collateral to secure loans involving other stock
loaned out by Merrill Lynch & Co. (not Lynas shares) and then subsequently returning
the LYC shares held as collateral when the loans of other securities were repaid; and,
o Merrill providing LYC shares as collateral for other stock lending it has engaged in, and
receiving them back as the loans were repaid.
A summary of the securities lending share flows is provided below.
Buying & Selling Stock Borrowing Stock Lending Collateral
OFF ON OFF ON OFF ON OFF ON
0 0 3,635,199 5,060,827 6,369,613 5,470,773 2,541,025,165 2,547,513,627

The extraordinary feature of the securities lending data is the volumes of share flows associated with
collateral. The volumes may have been due to Merrill Lynch borrowing shares in another company for
short selling purposes and using Lynas shares as collateral, or they may have resulted from Lynas shares
being advanced to Merrill Lynch in return for other securities that Merrill Lynch had loaned out.
What the extensive share flows do indicate is that the exposure to fluctuations in the share price of Lynas
Corporation provide very strong incentives to manage pricing outcomes. A fall in price for example can
throw collateral arrangements into disarray and a rise in price can throw lending arrangements into
disarray for those who have large open short exposures. It also needs to be borne in mind that there is no
question that prices can be managed and set at artificial levels if need be, even under the watch of
surveillance teams and regulators. There are a number of ways control over prices is achieved as
highlighted in Research Paper 7.2 Section, 7.2.1.16.
The share flows ON and OFF the register regarding the accounts of Merrill Lynch & Co. can be netted out as
follows.
OFF Movement ON Movements NET
2,551,029,977 2,558,045,227 7,015,250

79

The substantial holding as at Jan 17, 2008 was 28,907,995 shares for 5.07% of the register. The net share
flows of 7.02 million shares mean that the holding must have stood at around 21.89 million shares prior to
Sept 6, 2007. It is not known how many shares in the holding prior to Sept 6 would have represented
purchases and how many represented securities lending exchanges.
The other data that needs to be considered is the activity of broker Merrill Lynch (MERL) over the period
covered by the substantial notice compared to the buying and selling of the substantial shareholder Merrill
Lynch & Co. The results are as follows.
Period: Sept 6, 2007 to Jan 8, 2008 Sells Buys Net
Trades by Merrill Lynch & Co Group 0 0 0
MERL Broker Activity 9,851,342 8,383,871 -1,467,471

Broker Merrill Lynch is seen to have churned a substantial volume of shares for unknown clients but there is
the question of possible attempts to manage pricing outcomes given the large involvement with securities
lending revealed in the substantial shareholder notice. The issue of attempting to create an artificial price
may well apply if control over prices has supported the containment of lending exposures.

7.4.3.4.2 MERRILL LYNCH SUBSTANTIAL NOTICE JANUARY 24, 2008: Ceasing as a substantial shareholder.
Merrill Lynch & Co only remained as a substantial shareholder for just one week. A notice of ceasing as a
substantial shareholder was announced to the market on Jan 24, 2008. The holding fell below the 5%
threshold on Jan 17, 2008.
Again the predominant activity associated with the notice was securities lending, particularly in regard to
collateral. The share flows over the period Jan 8 to Jan 18, 2008 as disclosed in the notice were as follows.
Buying & Selling Stock Borrowing Stock Lending Collateral
OFF ON OFF ON OFF ON OFF ON
155,000 400,000 322,306 229,646 57,428,145 30,394,653 91,423,802 91,421,814

The net fall in holdings is summarized as follows:
Total OFF Movements Total ON Movements NET
149,329,253 122,446,113 -26,883,140

The large net outflow of shares meant that the previously announced substantial holding reduced from
28,907,995 shares to around 2,024,855 million shares.
The small volumes of buying and selling by Merrill Lynch & Co compare to broker buying and selling for the
period were as follows:

Sells Buys Net
Trades by Merrill Lynch & Co 155,000 400,000 245,000
MERL Broker Activity 4,201,933 617,315 -3,584,618

Broker MERL is seen to be active as a seller over the handful of days coinciding with the substantial holding
being reduced. Yet the reduction in holding was primarily because of securities lending transactions and in
particular the movements of shares associated with collateral.
There is of course no way of knowing what has actually taken place without audits.
80

The strange trading relationships between Merrill Lynch entities as traders buying and selling minimal
stock, but heavily involved in securities lending share flows, also needs to be considered in context with
the unusual activity of MSDW Affiliates in borrowing stock and not declaring any sales; particularly as their
House Broker was extremely active in the market as both a buyer and a seller.
The overwhelming features of the Jan 24, 2008 Merrill Lynch substantial shareholder notice was:
Large collateral share flows over a one week period where 91.4 million shares moved IN and OUT of
the substantial holding;
A net 27 million shares being loaned out;
A paucity of buying and selling in the market compared to the activity of broker Merrill Lynch (MERL);
The radically changed trading behaviour of MERL in selling 4.2 million shares over a 7 day period when,
in becoming a substantial shareholder, they bought 8.4 million shares and sold 9.85 million shares over
a period of 3.5 months. It is a very large turn around in a very small space of time;
Hardly any of the MERL buying and selling appears to have been for its substantial shareholder group.

7.4.3.4.3 COMBINED DATA FOR MERRILL LYNCH DISCLOSURES: (Initial Notice and Ceasing Notice combined)
The table summarizes share flows for both substantial shareholder notices.
Buying & Selling Stock Borrowing Stock Lending Collateral
OFF ON OFF ON OFF ON OFF ON
155,000 400,000 3,957,505 5,290,473 63,797,758 35,865,426 2,632,448,967 2,638,935,441

Totals for the various types of share flows have been displayed in the following chart. Share flows
associated with collateral are clearly the dominant feature. The amount of buying and selling for affiliates
is so small in comparison to the other share flows that it hardly even registers in the chart.



1 billion is a very large number. To help put matters into perspective, a lump sum of 1 billion dollars could
be drawn down to provide a pension of $100,000 per year for 10,000 years, and that doesnt allow for
increases to the lump sum because of interest earned.
Buying & Selling
Stock Borrowing
Stock Lending
Collateral
2.6 billion of collateral share
movements when considered
against the possible uses for
collateral as outlined in Section
7.4.3.3.8, helps to reveal how
vulnerable the system has become
because of securities lending and
unsustainable levels of leverage.
Collateral share flows represent
98% of all share flows associated
with the substantial shareholder
LYC Share Flows
January 2008
81

7.4.3.4.3.1 BUYING & SELLING DATA
Also of interest is a comparison between buying and selling by the substantial shareholder Merrill Lynch &
Co. to that of their broker Merrill Lynch Equities Australia (MERL). The trend is similar to that for the JP
Morgan Group, and the Morgan Stanley Group, where the House Broker predominantly tends to act for
other clients, not the substantial shareholder belonging to the group. The chart compares totals for buying
and selling.

















The disclosure on Jan 17 and Jan 24, 2008 provides a glimpse of what has occurred with Merrill Lynchs
involvement with securities lending. It also reinforces how effective regulation is virtually impossible given
the enormous data flows that are so difficult to trace given the opaque dealings that are possible under
current settlement arrangements and reporting requirements.
The above share flows relate to the period Sept 6, 2007 to Jan 17, 2008. Yet the massive securities lending
share flows associated with the Merrill Lynch substantial shareholder group for this period (i.e., 2.63 billion
shares ON & OFF the register for collateral share flows alone), need to be considered against the fact that
Merrill Lynch, the investment bank, was taken over by Bank of America during the GFC late 2008. While
the activities of the investment bank were absorbed by Bank of America, the broker operations continued.
The table compares Merrill Lynch (MERL) broker data for the period covered by substantial shareholder
notices and for the extended period following the Merrill Lynch Group ceasing as a substantial shareholder.
Trading by broker Merrill Lynch (MERL)
Period Sells Buys Net
Sep 6, 2007 to Jan 17, 2008 14,103,232 9,001,186 -5,102,046
Jan 18, 2008 to Apr 30, 2013 597,569,424 598,689,891 1,120,467


Unfortunately, no details are available for share movements related to any Bank of America/Merrill Lynch
substantial shareholder group. Either the holding was unwound following the Bank of America takeover or
the new group has remained under the 5% compulsory reporting requirement.
Net sales were 5.1 million shares in less
than 5 months of trading, yet after
ceasing as a substantial shareholder,
there were only 1.1 million of net
purchases in over 5 years of trading
where well over half a billion shares
were bought and sold.
Combined trading over the periods covered by the intial
substantial notice and the ceasing notice.
Sells Buys Net
Trades by Merrill Lynch & Co 155,000 400,000 245,000
MERL Broker Activity 14,053,275 9,001,186 -5,052,089


Buying & Selling by the
Merrill Lynch Substantial
Shareholder Group
Buying & Selling by
broker Merrill Lynch
(MERL)
97.6%
82


A window into securities lending was provided in Section 7.4.3.3.8 in reference to a securities lending
agreement included in the Morgan Stanley substantial shareholder notice of Aug 16, 2010.
The Merrill Lynch disclosure provides a snapshot of what lending on steroids might actually look like. The
raw numbers are that 14 million sales and 9 million buys by broker MERL over a 4.5 month period
translated into just 150,000 sales and 400,000 buys by the Merrill Lynch substantial shareholder.
It also coincided with collateral share movements involving Lynas shares that totalled 2.6 billion shares
moving into and out of the accounts of Merrill Lynch entities over the 4.5 month period.
One can only guess about the size of securities lending share flows that would accompany 600 million buys
and sells over the 5 year period after Merrill ceased as a substantial holder. It could however be expected
to exceed 2.6 billion by a very wide margin if Bank of America followed the trends set by the failed group.
7.4.3.4.4 COMMENT
There is something intrinsically wrong with a system that allows substantial shareholder status to come
about by entities looking to force prices lower through short selling and to capitalize on lower prices
through the exploitation of shareholdings belonging to others, not their own. The destruction of value
facilitated by securities lending has become a major focus of trading by sophisticated investors and has
provided enormous incentive to control prices in support of exposures to securities lending positions.
The incentives relate not only to managing the exposures to short positions established but to also
preserve the value of collateral advanced in support of short selling. The sheer size of securities lending
activity by some substantial holders very much portrays a tail wagging the dog situation where the
traditional function of the market has been hijacked by those looking to destroy value in support of the
exposures taken on. Yet, strangely, those exposures are both supported by the trading and lending activity
of other major stakeholders knowing that their holdings will be massively devalued through their support.
With the mindset and the trading practices of the most influential trading entities in the market, it would
seem that the larger the losses that can be inflicted by short selling, then the larger the gains that can
result for such entities. Unfortunately, they are sanctioned in their destructive agendas by regulators who
see nothing wrong with their activities according to the frameworks they are given to supervise trading.
Yet market manipulation is illegal and a detailed look at what actually takes place in trading might reveal a
few items that dont quite pass muster even if the trading is done within current guidelines.
The sorts of market abuses that can only be revealed by audits are likely to include:
Collusive practices between fund managers, major trading entities and brokers in assisting each
other with the movement of stock whether it is through securities lending, through dark pools, via
off-market adjustments or through the market via trading algorithms tuned in support of shared
trading agendas. After all, for short selling to work, someone has to sacrifice stock held for clients
under guardianship/management rights, and there needs to be co-operation in getting stock back
to unwind exposed positions. Collusion, it appears, is in the collective interests of those involved,
perhaps through the sharing of gains achieved through short selling, or where the entities helping
out with short covering get a chance at reciprocal favours at some future date. There have been
precedents for such behaviours which were referred to in Research Paper 7.1.
83

However this collusion is clearly not in the interests of retail investors and Superannuation Funds
that are the property of millions of Australians who rely on their portfolios to live comfortably in
retirement;

Abuses of provisions that sanction short selling which might even include naked short selling on an
intraday basis or within T plus 3, and which has virtually no chance of being detected without
audits;
Possibly unfair trading behaviours involving entities using multiple brokers to be continually buying
and selling in pursuit of trading agendas but on behalf of the same substantial interest, and with
algorithms used to camouflage the activity. Such trading invariably results in only minor changes to
beneficial ownership;
The abuse of rules that allow crossings to help force prices in a particular direction such as when
Down Ticks or even Up Ticks are persistently engineered by single share trades or even small
parcels of shares;
Trading abuses that involve wash trades to control pricing outcomes, or trading systems that
amount to the same thing, but avoid being classified as wash trades. An example is where
algorithms from a range of brokers recycle shares from a major selling broker to a major buying
broker but where both major brokers represent the same substantial interest. The transactions do
involve fleeting changes in ownership but effectively mimic wash trades by delivering the same
result (i.e., minimal changes to beneficial ownership and control over pricing levels). Trading data as
revealed by substantial notices suggests that such quasi wash trades are likely to represent a very
large proportion of the trading taking place.
The situation is demonstrated diagrammatically below with the selling by a major interest passing
into a broker pool, where shares are churned back and forth before eventually being extracted out
of the pool to a major buying interest. When the major seller and the major buyer happen to
represent the same substantial interests, or even related interests, the entire process has the same
effect that wash trades would have had between the two major interests, without the use of
intermediaries. Should the orders within the broker pool also represent the major seller and/or the
major buyer, the web of transactions would almost certainly be judged as exercising artificial control
over the market. The situation suggests that audits could be extremely revealing.









Securities lending share flows, which possibly represent the most loosely regulated and most
camouflaged activity in the market, generate enormous incentives to control pricing outcomes so
that exposures are carefully maintained at acceptable levels and so that winning trades are more
readily consummated. Research has certainly demonstrated that share prices can be unfairly
moved anywhere that is deemed necessary by major financial interests without invoking
regulatory concerns.
Major
Net
Seller
Major
Net
Buyer
BROKER POOL
Back and forth churn trades between
brokers making up the pool
Sell trades by a major net seller to brokers
in the pool which are then churned
through other brokers
Buy trades extracted from brokers
in the pool by a major net buyer
84



Section 7.4.3 contd
LYNAS CORPORATION LTD SUBSTANTIAL SHAREHOLDER DISCLOSURES

7.4.3.5 DOWNTICK AND UPTICK CONSIDERATIONS

The share price of a company is meant to be an indication of what the company is worth based on an open auction
system between genuine buyers and genuine sellers. However with the advent of trading algorithms, prices can
change markedly with only small parcels of shares involved, and often the buying or selling of even a single share can
move the share price up or down.
Downtick and Uptick data can therefore provide some interesting insights into trading behaviours, where the
brokers that cause large fluctuations in prices but with only a small volume of trades attract suspicion as to their
motivations for impacting prices to the extent they do. Such trading activity requires close scrutiny given the recent
High Court decision which came down heavily on attempts to create and maintain artificial pricing levels. Behaviours
designed to artificially increase prices were referred to as illegal under the Corporations Act with the decision being
handed down unanimously by 7 High Court judges. It follows that behaviours designed to lower or even cap share
prices would also be regarded as share price manipulation and an offence under the Corporations Act.
The following section looks at Downtick and Uptick trends associated with Lynas Substantial Shareholder notices.
85

7.4.3.5.1 FURTHER TRADING ANOMALIES ASSOCIATED WITH SUBSTANTIAL NOTICES: Uptick and Downtick Data
The trend for affiliates of substantial shareholders to involve a mix of brokers to support their buying and
selling, with or without their House broker, is clearly evident in the trading data associated with Lynas
substantial notices .
Also present in the trading data is a tendency for other brokers to be trading in a way that is likely to have
supported the trading objectives of affiliates even though they may not have been buying and selling
specifically for the substantial holder.
The support shows up as trading churn, but also in Uptick and Downtick data where control over prices has
been achieved, often in contrast to the small volumes of trades put through the market, (i.e., persistent
numbers of small trades have had a significant impact on pricing levels).

7.4.3.5.1 CURRENT TRENDS
The data used to assess trading in the following sections has been extracted from Lynas Corporation
substantial shareholder notices over several years. There havent been any notices during 2013 despite
2.16 billion shares trading between the beginning of January and the end of June 2013.

It represents an enormous number of transactions, the majority of which would have been camouflaged
from view by a system that delivers anonymity and opaque trading for sophisticated investors. An
absence of substantial notices during the period also means that all corporate activity has been sucessfully
hidden from view. It makes the extremely subdued share price performance of the company extremely
suspicious especially in the light of the large number of shares traded and the advanced stage of
development of the Companys significant rare earths project.

The trend whereby minor players have a disproportionate impact on pricing levels is however still a
persistent feature of trading as demonstrated by the following examples taken from June 2013 trading.

June 11, 2013 June 18, 2013 June 25, 2013
DT
Sellers
% DT
Sells
% of all
Sells
DT
Sellers
% DT
Sells
% of all
Sells
DT
Sellers
% DT
Sells
% of all
Sells
MSDW 29.3% 12.5% MSDW 23.8% 9.2% MERL 48.9% 1.9%
COMM 17.8% 16.5% GS 18.1% 16.4% DMG 16.4% 3.1%
AIEX 13.6% 10.4% COMM 11.0% 24.7% COMM 12.2% 39.2%
MACQ 11.0% 2.6% CSUI 11.0% 2.5% UBS 3.9% 1.5%
ITG 5.2% 0.4% JPM 5.7% 2.2% ETRD 2.8% 4.9%
DT
Buyers
% DT
Buys
% of all
Buys
DT
Buyers
% DT
Buys
% of all
Buys
DT
Buyers
% DT
Buys
% of all
Buys
MSDW 50.8% 38.6% MSDW 23.8% 9.2% COMM 35.88% 39.2%
VIRT 18.3% 11.7% GS 18.1% 16.4% MERL 20.6% 1.9%
COMM 11.5% 17.0% COMM 11.0% 24.7% VIRT 12.7% 9.72
GS 5.8% 5.0% CSUI 11.0% 2.5% DMG 9.9% 3.0%
DMG 2.6% 4.5% JPM 5.7% 2.2% MSDW 4.2% 4.04



Examples such as Merrill Lynchs massive involvement with Downtick sales on June 25 (i.e., 49% of all DTs)
with just 1.9% of all selling taking place, is an astonishing statistic. It points strongly towards attempts being
made to control pricing levels rather than genuine selling. Not only did they force Downticks as sellers, but
they also facilitated Downticks as buyers. Again their levels of buying in the market were minimal compared
to the number of purchases they made that were associated with Downticks in price. The trading suggests
strong co-operation amongst brokers in controlling pricing levels.

86

The data is full of such anomalies, even if not quite as pronounced as the Merrill Lynch example. It further
supports notions of trading being controlled by major interests by spreading their influence through multiple
brokers and using algorithms that deliver specific trading agendas. The use of multiple algorithms designed
to interact with each other to deliver the trading agendas of sophisticated investors represent very major
concerns for market integrity; concerns that are barely even recognized given the current high levels of
acceptance of HFT trading algorithms by the market regulator.
Collusion between brokers and/or the use of multiple brokers by single entities suggests trading that is likely
to reflect artificial pricing levels, far removed from the price discovery that would be expected from genuine
buying and selling by entities acting independently in the market. Hopefully the recent High Court decision has
provided strong directions to address widespread trading anomalies, identified by research, as likely to be
setting artificial prices.

7.4.3.5.1.2 TRADING BY COMMONWEALTH SECURITIES (COMM)
Retail brokers Commonwealth Securities and Etrade Securities have led the buying and selling in Lynas
shares during 2013. A summary of the activity of leading brokers between January 1 and June 30, 2013 is
summarized in the table. Market Share is based on the total value of buying and selling by each broker
compared to all buying and selling.
ENTITY SELLS BUYS NET MARKET SHARE
COMMONWEALTH 500,043,549 536,145,427 36,101,878 24.1%
E-TRADE

198,032,847 202,168,768 4,135,921 9.5%
CITIGROUP

179,166,394 176,485,712 -2,680,682 8.2%
MORGAN STANLEY 175,773,597 153,089,241 -22,684,356 7.5%

However, a common misconception is that it is retail traders/investors who are responsible for the large
trading volumes associated with retail brokers. The reality is that sophisticated investors, led by the
investment banks, trade heavily through the retail brokers as well as through the corporate brokers, with
their trading activity camouflaged by the activity of small retail investors.
The activity by sophisticated investors is suggested by the parcel sizes put through the market in LYC shares.
For example on Jun 18, 2013, 31.47 million shares traded with the share price closing at 43 cents. COMM
was the leading broker by a very wide margin. The table shows the trading data for the leading brokers. It
also includes the amount of buying and selling by brokers that involved parcel sizes of 10,000 shares or
more, compared to the amount of buying and selling that was represented by parcel sizes of 20,000 shares
or more.

SELLING DATA
BUYING DATA
NET
VOLUMES
MARKET
SHARE
ENTITY
TOTAL SELL
VOLUMES
10,000 shares
or more
20,000 shares
or more
TOTAL BUY
VOLUMES
10,000 shares
or more
20,000 shares
or more
COMMONWEALTH 7,782,873 97.6% 93.3% 9,325,316 97.4% 90.8% 1,542,443 27.1%
GOLDMAN SACHS 5,169,974 96.9% 73.8% 1,881,377 98.2% 94.0% -3,288,597 11.2%
MORGAN STANLEY 2,878,798 71.3% 51.8% 2,908,836 73.3% 54.3% 30,038 9.2%
DEUTSCHE

2,600,233 91.9% 84.5% 3,025,355 91.2% 80.1% 425,122 9.0%


Leading Brokers - Jun 18, 2013 LYC Trading
93.3% of COMM sales consisted of
orders of 20,000 shares or more.
The data for Commonwealth Securities clearly shows a strong institutional presence, especially with COMMs
high proportion of trades above 20,000 shares compared to the 3 corporate brokers. Small retail investors
clearly wouldnt be responsible for the consistently large lines of stock traded by COMM.

87

7.4.3.5.2 FURTHER UP TICK AND DOWN TICK DATA
The examples that follow are taken from trading periods associated with Lynas Corporation substantial
shareholder notices. The trends highlighted by the recent trading data in Section 7.4.3.5.1 where minor
brokers based on their levels of by selling and buying volumes, have had a significantly greater impact on
downward price movements than would be expected from their trading volumes. Similar trends existed in
trading that took place in August 2010, as demonstrated by the following two examples.

Example 1:


The leading Up Tick and Down Tick data for AUG 11, 2010 together with the percentage share of all selling
and all buying is summarized below. Variations are brought to attention by shading.
Down Ticks
Up Ticks
Broker % of DTs % of all Sells

Broker % of UTs % of all Buys
COMM 28.7% 12.7%

MERL 29.2% 0.8%
GS 11.3% 2.7%

UBSW 24.2% 17.1%
AIEX 9.6% 3.1%

CITI 14.2% 5.9%
ETRD 9.6% 4.7%

COMM 11.7% 15.3%

It is a reasonable assumption that the amount of buying (or selling) by a broker ought to be commensurate
with the number of Upticks (or Downticks) they are associated with, however, the trading data does not
reflect such thinking. Persistent anomalies involving marked variations between Tick Data compared to
buying & selling give rise to suspicions about the impact of algorithms over trading. Control over price
movements by the leading brokers on Aug 11 has generally run at levels well above their overall buying
and selling. The stand out is Merrill Lynch (MERL) who were responsible for almost a third of all Upticks
despite the miniscule amount of buying it put through the market. Although small in terms of overall
volume, repetitive MERL orders broken into tiny parcel sizes consistently caused upward ticks in the share
price. It is a damming statistic in terms of possible market manipulation, and it demonstrates the impact
algorithms have in managing pricing levels. The data shaded yellow is also anomalous but less dramatic.

Example 2:


Down Ticks
Up Ticks
Broker % of DTs % of all Sells

Broker % of UTs % of all Buys
UBS 33.1% 4.1%

UBS 27% 36.1%
COMM 18.3% 11.7%

COMM 15% 12.4%
GS 8.1% 1.8%

GS 14% 7.5%
ETRD 6.7% 3.7%

DMG 11% 7.3%



The stand out feature of trading was the impact that UBS had in acting for MSG affiliates. With only 4.1% of
all selling, it was responsible for a third of all downward pricing movements, the majority of which were
crossings. Crossings also dominated the Upticks associated with UBS Trades. Crossings are often associated
with price changes, and when they consistently involve only small volumes of shares to implement price
changes, the activity identifies more with share price manipulation than genuine trading.

AUG 11, 2010 Sells Buys Net
MSG trades 22,142 3,590,122 3,567,980
Broker MSDW 228,167 211,626 -16,541


UBS appeared to be the active broker on behalf of
MSG affiliates with 4,038,261 buys and 820,935
sells. (Refer Section 7.4.3.3.7).
AUG 10, 2010 Sells Buys Net
MSG trades 2,221,079 14,440,441 12,219,362
Broker MSDW 2,381,231 2,382,305 1,074


UBS gain appeared to be the active broker on behalf of
MSG affiliates with 13,181,925 buys and 1,502,620
sells (Refer Section 7.4.3.3.7), MSDW was active as
well, although with only a small number of crossings
88

7.4.3.5.3 MORGAN STANLEY SUBSTANTIAL NOTICES: Uptick and Downtick Data
The following tables provide a more comprehensive overview of trading across several substantial holder
notices and further reveal the targeting of lower pricing levels by brokers. Again, the prominent brokers
havent generally been significant buyers or sellers of stock but they have had a major influence over
pricing levels. They have achieved this by using lots of small trades to force Upticks and Downticks.
The data suggests a wolf pack mentality where small players seem to be helping to set the pricing levels
from which major corporate activity takes place. Brokers who have had a disproportionate impact on
pricing levels compared to the volumes they have put through the market have again been highlighted.
The extent of shading is therefore an indication of the amount of artificial price setting taking place.
% DTs refers to a brokers share of all Downtick transactions
% Sells refers to a brokers share of all selling.
AUG 10, 2010 Sells Buys Net Leading Brokers by Down Ticks Leading Brokers by Up Ticks
MSG trades 2,221,079 14,440,441 12,219,362 Broker % DTs % Sells Broker % UTs % Buys
Broker MSDW 2,381,231 2,382,305 1,074 UBS 33.1% 4.1% UBS 27.3% 36.1%
UBS was the likely buyer for the MSG Group COMM 18.3% 11.7% COMM 14.8% 12.4%
Crossings by MSDW amounted to 283,750 Shares GS 8.1% 1.8% GS 14.0% 7.5%


AUG 11, 2010 Sells Buys Net Leading Brokers by Down Ticks Leading Brokers by Up Ticks
MSG trades 22,142 3,590,122 3,567,980 Broker % DTs % Sells Broker % UTs % Buys
Broker MSDW 228,167 211,626 -16,541 COMM 28.7% 12.7% MERL 29.2% 0.8%
UBS was again the likely buyer for the MSG Group GS 11.3% 2.7% UBS 24.2% 17.1%
Crossings by MSDW: nil AIEX 9.6% 3.1% CITI 14.2% 5.9%


AUG 12, 2010 Sells Buys Net Leading Brokers by Down Ticks Leading Brokers by Up Ticks
MSG trades 2,836,113 15,655,754 12,819,641 Broker % DTs % Sells Broker % UTs % Buys
Broker MSDW 3,151,037 86,725 -3,064,312 COMM 25.9% 11.4% UBS 51.1% 38.5%

UBS 22.1% 36.6% COMM 17.3% 18.5%
UBS was again the likely buyer for the MSDW Group MERL 20.0% 0.6% MERL 8.7% 1.2%


MAY 19, 2010 Sells Buys Net Leading Brokers by Down Ticks Leading Brokers by Up Ticks
MSG trades 0 11,383,438 11,383,438 Broker % DTs % Sells Broker % UTs % Buys
Broker MSDW 12,099,631 12,867,923 768,292 UBS 36.7% 3.0% COMM 58.1% 2.1%
MSDW looks to have been the active broker for the Group DMG 17.2% 1.5% CSUI 13.2% 0.8%
Crossings amounted to 10,274,586 shares

CITI 5.3% 2.1% MSDW 13.2% 50.4%

MAY 20, 2010 Sells Buys Net Leading Brokers by Down Ticks Leading Brokers by Up Ticks
MSG trades 0 6,017,683 6,017,683 Broker % DTs % Sells Broker % UTs % Buys
Broker MSDW 4,564,409 6,017,683 1,453,274 COMM 36.6% 13.1% CITI 31.3% 3.4%
UBS was the likely buyer for the MSG Group GS 24.4% 4.4% GS 20.5% 5.1%
Crossings by MSDW amounted to 283,750 Shares ETRD 6.1% 1.5% CSUI 15.7% 1.1%

JUN 8, 2010 Sells Buys Net Leading Brokers by Down Ticks Leading Brokers by Up Ticks
MSG trades 0 6,039,732 6,039,732 Broker % DTs % Sells Broker % UTs % Buys
Broker MSDW 34,365 34,500 135 MERL 27.3% 1.8% ITG 38.3% 1.6%
UBS 18.2% 47.4% MERL 31.9% 0.2%
Crossings by MSDW amounted to 5,136,882 shares CSUI 13.6% 2.1% CITI 6.4% 5.1%

JUL 14, 2010 Sells Buys Net Leading Brokers by Down Ticks Leading Brokers by Up Ticks
MSG trades 0 9,566,059 9,566,059 Broker % DTs %Sells Broker %UTs %Buys
Broker MSDW 3,819,746 9,586,059 5,766,313 COMM 29.8% 28.9% MSDW 43.0% 27.3%
ETRD 12.2% 9.4% COMM 15.5% 12.7%
Crossings by MSDW amounted to 1,422,641 shares MSDW 11.5% 10.9% MERL 6.3% 0.7%
NOTE:
89

7.4.3.5.4 JP MORGAN SUBSTANTIAL NOTICES: Uptick and Downtick Data
The trends evident in trading associated with the Morgan Stanley disclosures are alo seen to be evident in
trading associated with the JPM substantial shareholder notices as shown below. The data correlates to
the substantial shareholder notices summarized in Section 7.4.3.2
MAY 5, 2010 Sells Buys Net Leading Brokers by Downticks Leading Brokers by Upticks
JPM Affiliates 0 2,905,338 2,905,338 Broker % DTs % Sells Broker % UTs %
Buys Broker JPM 2,823,201 2,905,338 82,137

UBS 34.0% 3.9%

COMM 37.8% 16.7%
JPM did the buying for the JPM Group and sold for other clients. COMM 18.3% 15.3% UBS 26.9% 2.7%
Crossings by JPM amounted to 446,327 Shares. MERL 8.7% 11.5% MERL 6.3% 4.8%


MAY 25, 2010 Sells Buys Net Leading Brokers by Downticks Leading Brokers by Upticks
JPM Affiliates 0 4,235,395 4,235,395 Broker % DTs % Sells Broker % UTs % Buys
Broker JPM 211,616 81,666 -129,950 UBS 54.9% 15.4% CITI 55.9% 9.0%
JPM Group trading was done by a wide mix of brokers. MERL 14.3% 1.1% CSUI 15.1% 1.0%
Crossings by JPM amounted to 81, 666 Shares MSD 9.9% 12.2% MACQ 6.5% 24.0%
MAY 27, 2010 Sells Buys Net Leading Brokers by Downticks Leading Brokers by Upticks
JPM Affiliates 0 1,955,247 1,955,247 Broker % DTs % Sells Broker % UTs % Buys
Broker JPM 0 660,633 660,633 UBS 41.1% 6.5% CITI 43.4% 14.7%
JPM Group buying was again done by a mix of brokers. MERL 21.7% 0.8% CSUI 27.9% 2.8%
Crossings by JPM: nil CITI 12.4% 8.1% MACQ 7.0% 4.4%

AUG 13, 2010 Sells Buys Net Leading Brokers by Downticks Leading Brokers by Upticks
JPM Affiliates 0 5,862,399 5,862,399 Broker % DTs % Sells Broker % UTs % Buys
Broker JPM 3,278,295 8,284,104 5,005,809 UBS 47.7% 38.1% UBS 39.0% 38.1%
JPM appears to have both churned and accumulated stock. MERL 13.9% 0.4% COMM 22.1% 7.9%
Crossings by JPM: nil COMM 11.3% 19.5% ETRD 6.5% 3.8%
AUG 18, 2010 Sells Buys Net Leading Brokers by Downticks Leading Brokers by Upticks
JPM Affiliates 9,193,045 9,356,478 163,433 Broker % DTs % Sells Broker % UTs % Buys
Broker JPM 3,384,443 89,513 1,074 UBSW 20.9% 3.3% COMM 33.5% 12.3%
MSDW appeared to be the broker assisting the JPM Group. MACQ 18.6% 8.1% MERL 11.9% 3.7%
Crossings by JPM amounted to 77,092 Shares MERL 18.6% 3.7% ETRD 11.4% 4.9%


AUG 30, 2010 Sells Buys Net Leading Brokers by Downticks Leading Brokers by Upticks
JPM Affiliates 6,650,000 6,831,541 181,541 Broker % DTs % Sells Broker % UTs % Buys
Broker JPM 78,933 102,608 23,675 INST 20.1% 10.4% COMM 31.6% 11.7%
JPM Group trading was done by a wide mix of brokers. MACQ 14.2% 5.0% MERL 18.6% 3.7%
Crossings by JPM amounted to 78,933 Shares COMM 13.0% 13.4% UBS 18.1% 2.7%

SEP 22, 2010 Sells Buys Net Leading Brokers by Downticks Leading Brokers by Upticks
JPM Affiliates 13,547,857 13,134,816 -413,041 Broker % DTs % Sells Broker % UTs % Buys
Broker JPM 1,701,000 96,295 -1,604,705 COMM 21.5% 10.9% COMM 18.5% 16.9%
JPM Group trading was again done by a wide mix of brokers. MERL 16.8% 5.6% UBS 13.7% 5.1%
Crossings by JPM: nil CITI 12.6% 16.6% DMG 9.5% 12.1%


7.4.3.5.5 A TYPICAL QUERY POSED BY THE TRADING DATA
On May 25, the JPM Group were strong acquirers of stock (i.e., 4.2 million shares) through a mix of brokers
with their House Broker JPM having a subdued profile in the market. Yet just two brokers, UBS and Merrill
Lynch supplied approximately 70% of all Down Ticks that occurred, but with their combined market shares
representing only 16.5% of the selling that took place. The data suggests that the selling was non-genuine and
designed to have maximum impact on the market. As such it could be regarded as manipulative, and the
prices that resulted could be viewed as somewhat artificial.

The patterns strongly suggest support by the two brokers in providing downward pressure to prices, while
accumulation was taking place for the JPM Group through other brokers.


90

7.4.3.5.6 MERRILL LYNCH (MERL) ANOMALIES
Broker Merrill Lynch (MERL) featured prominently in all data. At various times they were the leading sellers
responsible for falls in price and the leading buyers resulting in increases in prices, albeit on small volumes
of trades. The characteristics of trading by MERL, over the period covered by both JPM and MSDW notices,
is summarized below. The occasions where MERL strongly influenced pricing levels despite a small trading
profile in the market, have again been highlighted by shading.
Market Share refers to MERL buying and selling compared to the buying and selling of all brokers.
% Downticks (% DTs) refers to the number of Downticks caused by MERL sell trades compared
to all Downticks that occurred.
% Sells refers to the selling by MERL (by volume) compared to the volume of all sales.
Basic premise used to assess trading: From a logical perspective, and assuming fair and genuine
trading, the impact of a broker on price movements ought to reflect their market shares in
relation to buying and selling.
Ref 2010 Market Share Net Trades

% DTs % Sells % UTs % Buys
JPM Data Aug 18 3.5% 179,827

18.6% 3.7% 11.9% 3.7%
JPM Data Aug 30 3.5% 81,737

2.4% 3.4% 18.6% 3.7%
JPM Data Sept 22 5.1% -369,253

16.8% 5.6% 9.5% 4.6%
JPM Data May 5 8.0% -2,499,386

8.7% 11.5% 6.3% 4.8%
JPM Data May 25 0.7% -92,475

14.3% 1.1% 0.0% 0.4%
JPM Data May 27 0.4% -97,778

21.7% 0.8% 0.0% 0.0%
JPM Data Aug 13 0.4% 4,989

13.9% 0.4% 1.3% 0.4%
MSDW Data Aug 10 1.3% 98,565

2.1% 1.1% 6.8% 1.4%
MSDW Data Aug 11 1.4% -286,297

2.6% 2.0% 29.2% 0.8%
MSDW Data Aug 12 0.9% 271,310

20.0% 0.6% 8.7% 1.2%
MSDW Data May 19 0.7% -158,940

0.0% 1.1% 10.2% 0.4%
MSDW Data May 20 1.3% -213,155

0.0% 1.8% 0.0% 0.8%
MSDW Data Jun 8 1.0% -167,351

27.3% 1.8% 31.9% 0.2%
MSDW Data July 14 1.0% -217,259

3.8% 1.3% 6.3% 0.7%

-3,465,466



Merril Lynch has generally been a net seller of stock on the days reviewed, although trading on a single day
(i.e., May 5) saw 2.499 million net sales account for 72% of all net selling. The remarkable features of
MERL trading can be listed as follows:
Their market share of all trading averaged 2.1%, although if their prominence on May 5 is excluded,
their market share for the period amounts to just 1.5%.
Despite an extremely small market share, MERL was clearly a prominent broker in controlling
pricing outcomes. Their dominance is indicated by the extent of shading in the table which draws
attention to anomalous trading characteristics.
On the day that they had a prominent market share (i.e., 8.0% on May 5) their impact over price
movements was more in keeping with what would logically be expected from their trading volumes.

The unusal trading anomalies of just one broker clearly highlight the influences that algorithms can have
over trading. Ignoring MERLs 1.5% share of trading, the great unknown about trading in Lynas, and about
trading generally in our modern markets, is the extent of influences they can have over trading involving
the remaining 98.5% of trades where the results are more readily camouflaged. The situation casts a very
dark cloud over market integrity.
NOTE:
91



Section 7.4.3 contd
LYNAS CORPORATION LTD SUBSTANTIAL SHAREHOLDER DISCLOSURES

7.4.3.6 SUMMARY OF TRADING BEHAVIOURS

92

7.4.3.6.1 SUMMARY OF TRADING BEHAVIOURS
Disclosures concerning both the JP Morgan substantial shareholder group and the Morgan Stanley
substantial shareholder group are associated with trading behaviours that have the appearance of Price
Manipulation and Wash Trades as outlined by the ASX and documented in Section 7.4.1.1 of the current
research paper. Many appear to also qualify in terms of forcing artificial prices, and so fall within the
guidelines provided by the recent High Court decision about market manipulation
However without knowledge about the trading relationships between entities, no definitive opinion can be
reached. That sort of knowledge can only be gathered from the auditing of accounts.
The ASX explanations are again provided below.
Price manipulation
Placing buy or sell orders (or both) into the market in order to change or maintain the price of a stock.
Wash trades and pre-arranged trading
A wash trade is a trade in which there is no change in the beneficial ownership of the securities - the buyer
is either also the seller or is associated with the seller. A pre-arranged trade involves two parties trading on
the basis that the transaction will be reversed later, or under an arrangement that removes the risk of
ownership from the buyer. "Pooling or churning" can involve wash sales or pre-arranged trades executed
in order to give an impression of active trading, and therefore investor interest in the stock.


Research has consistently demonstrated that the trading relationships between House Brokers and the
range of Other Brokers who have been used to transact on behalf of substantial shareholder groups,
resembles trading that would normally qualify as share price manipulation. Audits of course represent the
only way a full and proper assessment can be made.
Nevertheless, the following patterns of trading are clearly evident.
Crossings being avoided when clearly the House Brokers have had the capacity to cross substantial
amounts of buying and selling between substantial shareholders and other clients. In such instances
putting the majority of trades through the market can suppress the price discovery process;
Accumulation through a range of brokers with the possibility of trading churn through other
brokers aiding the accumulation, all taking place while the House Broker has adopted a low profile;
Selling through a range of brokers with the possibility of trading churn through other brokers aiding
the disposal of holdings, again while the House Broker has adopted a low profile;
House Brokers selling while Affiliates are buying through other brokers;
House Brokers buying while Affiliates are selling through other brokers;
House Brokers churning stock accompanying the accumulation by Affiliates through other brokers
and at other times churning stock accompanying the disposal of stock by Affiliates through other
brokers;
Anomalous Up Tick and Down Tick data associated with brokers acting for substantial holder
affiliates;
Anomalous Up Tick and Down Tick data associated with brokers not necessarily buying or selling for
substantial holder affiliates, but where they look to have acted in support of the trading objectives
of affiliates;
Substantial holders selling on good news when there is involvement in setting up good news by the
House Broker through coverage of the stock, through support in hosting company presentations
and through support with fund raising initiatives, even as an underwriter.
The difficulty with brokers churning stock is that with the netting of trades it is difficult to ascertain if the
churning was in support of accumulation (and/or the disposal of holdings) by the substantial shareholder.
All of the trading activities identified have the potential for creating artificial pricing levels and so require
proper investigation and clarification.