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August 31, 1999

Stop the Press:IR Pro Hates Day Traders

By Philip Scipio

Also in this article

  • Stop the Press:IR Pro Hates Day Traders

Day traders are like a hornets' nest in your attic when they target a company's stock," grouses Tabitha Zane, an investor relations vice president at Applied Digital Solutions.

Zane is as mad as hell.

"These [day traders] don't care what the company does and who the management is. They aren't in it for the long-term."

Earlier this year that's what Zane told a session on day trading, at the annual conference of the National Investor Relations Institute in Orlando.

"I don't want these people owning my stock," she added as the audience erupted with cheers. "I hate them."

Specifically, Zane complained that institutional investors have dumped Applied Digital stock because of its excessively volatile price. Analysts don't like the stock as a result, she claimed.

Who to blame? Day traders. That volatility, Zane says, has been largely triggered by day traders targeting her company.

Zane's outburst is possibly the strongest public attack ever on day trading by an investor relations pro. That makes it stand out among the din of regulatory and media scrutiny of day trading in recent months.

Most recently,

the North American

Securities Regulators (NASSA) issued a report castigating day trading firms for shady practices and possible securities law violations.

Bad Timing

The NASAA report couldn't have come at a worse moment for the day-trading industry. It coincided with the bloody massacre by a deranged day trader in Atlanta. Mark Barton opened fire at the offices of two prominent day-trading outfits, All-Tech Investment Group, and Momentum Securities, killing nine people.

His estranged wife and two children were later found bludgeoned to death.

Earlier, All-Tech settled a lawsuit with Massachusetts regulators who accused the Montvale N.J.-based firm of running a "viper's nest" of illegal activities in the state.

A no-holds-barred attack on day trading by an investor relations pro, on the other hand, is different. In the past, some of the most outspoken critics of day trading were Nasdaq market makers. These traders accused so-called SOES bandits - day traders who trade via SOES - of illegally pocketing huge sums of money in fast-moving markets. They said the bandits hit the bids and took the offers of market makers that had not updated their prices.

Day trading - the entry and rapid execution of orders by an individual glued to a computer - is not illegal. But regulators say the industry may be duping naive investors attracted by questionable promises of instant wealth.

The New Enemy

Zane is possibly a different enemy of sorts for day traders. While market makers saw their crusade against SOES bandits turned upside down, Zane comes armed with different credentials. She is a representative voice of a publicly-traded Nasdaq listed company.

(In August 1993, the U.S. Court of Appeals for the District of Columbia effectively torpedoed market makers' strongest accusations about SOES bandits. The court ruled that the Securities and Exchange Commission failed to justify approval of a rule that curbed the use of SOES by individual investors. Nonetheless, in recent times, a reduction in the SOES tier size and other changes have made it harder to profit as a bandit.)