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Published On: Mon, Aug 24th, 2015

What’s The Plunge Protection Team (PPT)? – Eric Dubin

ppt

TND Exclusive:  Eric Dubin

The Plunge Protection Team is the nickname for the President’s “Working Group on Financial Markets,” which was established by Executive Order 12631.  It’s commonly referred to as the “PPT.”  Technically speaking, it involves more than just the nominated bodies within the executive order.  The Exchange Stabilization Fund plays a major support role.  Central banks other than the Fed also conduct extensive coordination.  Truth be told, the market interventions of the last decade and in particular, following the 2008 crash extend well beyond EO 12631.  

When markets dive as they are doing today, the PPT is active.  Over my 25 years of market experience, I have observed that frequently the PPT is active in advance of a US market open like today, as well as near the middle of the day, and at 3:30pm EST, 3:45pm EST and in the minute or two going into the close of regular market trading.  Today, selling pressure was far too strong going into the close for the PPT to do anything about it.  But their footprints appear to be visible during the other common time windows of high probability PPT action.

S&P 500 Trading, Aug 24, 2015

S&P 500 Trading, Aug 24, 2015

 

The following is the executive order signed by President Ronald Reagan on March 18, 1988:

# # # # #

By virtue of the authority vested in me as President by the Constitution and laws of the United States of America, and in order to establish a Working Group on Financial Markets, it is hereby ordered as follows:

Section 1. Establishment. (a) There is hereby established a Working Group on Financial Markets (Working Group). The Working Group shall be composed of:
(1) the Secretary of the Treasury, or his designee;
(2) the Chairman of the Board of Governors of the Federal Reserve System, or his designee;
(3) the Chairman of the Securities and Exchange Commission, or his designee; and
(4) the Chairman of the Commodity Futures Trading Commission, or her designee.
(b) The Secretary of the Treasury, or his designee, shall be the Chairman of the Working Group.
Sec. 2. Purposes and Functions. (a) Recognizing the goals of enhancing the integrity, efficiency, orderliness, and competitiveness of our Nation’s financial markets and maintaining investor confidence, the Working Group shall identify and consider:
(1) the major issues raised by the numerous studies on the events in the financial markets surrounding October 19, 1987, and any of those recommendations that have the potential to achieve the goals noted above; and
(2) the actions, including governmental actions under existing laws and regulations (such as policy coordination and contingency planning), that are appropriate to carry out these recommendations.
(b) The Working Group shall consult, as appropriate, with representatives of the various exchanges, clearinghouses, self-regulatory bodies, and with major market participants to determine private sector solutions wherever possible.
(c) The Working Group shall report to the President initially within 60 days (and periodically thereafter) on its progress and, if appropriate, its views on any recommended legislative changes.

Sec. 3. Administration. (a) The heads of Executive departments, agencies, and independent instrumentalities shall, to the extent permitted by law, provide the Working Group such information as it may require for the purpose of carrying out this Order.
(b) Members of the Working Group shall serve without additional compensation for their work on the Working Group.
(c) To the extent permitted by law and subject to the availability of funds therefore, the Department of the Treasury shall provide the Working Group with such administrative and support services as may be necessary for the performance of its functions.

Source: The provisions of Executive Order 12631 of Mar. 18, 1988, appear at 53 FR 9421, 3 CFR, 1988 Comp., p. 559, unless otherwise noted.

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About the Author

- Mr. Dubin is the Managing Editor of TheNewsDoctors.com. He has 25 years of experience as an independent buyside securities and global macro analyst. He has well over a decade of experience as a financial journalist, editor and political analyst. He's primarily an autodidact, but his formal education includes degrees in economics, international relations and MBA. He welcomes feedback on his articles and will make an effort to respond to comments. Email Eric by sending to "Eric" and then @TheNewsDoctors.com. He can also be "followed" on Facebook: https://www.facebook.com/EricDubin

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