A new way to Short on a Downtick ?

[WinSum]

Please comment if the following hypothetical transaction violates any SEC rule, Exchange/ECN rule or ethics.


Premise: It is differcult to short NYSE stocks that are free-falling because of the down-tick rule.

Possible Trading Solution:
1. Open 2 brokerage accounts.
2. When you want to short a NYSE stock on a downtick, use Brokerage Account #1 to initiate a short position.
3. Route Brokerage Account #1's Short Sell order to ISLD ECN and let it sit there on the Offer.
4. Use Brokerage Account #2 to buy the Short Sell order that you left on ISLD ECN
5. Turn around and hit NYSE bid with the Sell order from your Brokerage Account #2. (You don't violate the downtick rule because Brokerage Account #2 is Long on the stock)

This in effect has a wash transaction on Brokerage Account #2 but you will have initiated short position on Brokerage Account #1 in spite of a downtick.

What do you think ? Would this hypothetical transaction be considered as manipulation or unethical since part of this transcation requires you to buy and sell to yourself.

 

[MR_WYTE]

um....do bees bee, do bears bear?? you answered your own question...

 

[Maverick74]

Quote from WinSum:

Please comment if the following hypothetical transaction violates any SEC rule, Exchange/ECN rule or ethics.


Premise: It is differcult to short NYSE stocks that are free-falling because of the down-tick rule.

Possible Trading Solution:
1. Open 2 brokerage accounts.
2. When you want to short a NYSE stock on a downtick, use Brokerage Account #1 to initiate a short position.
3. Route Brokerage Account #1's Short Sell order to ISLD ECN and let it sit there on the Offer.
4. Use Brokerage Account #2 to buy the Short Sell order that you left on ISLD ECN
5. Turn around and hit NYSE bid with the Sell order from your Brokerage Account #2. (You don't violate the downtick rule because Brokerage Account #2 is Long on the stock)

This in effect has a wash transaction on Brokerage Account #2 but you will have initiated short position on Brokerage Account #1 in spite of a downtick.

What do you think ? Would this hypothetical transaction be considered as manipulation or unethical since part of this transcation requires you to buy and sell to yourself.

100% illegal. It's called stock manipulation. There may even be a prison term associated with that along with a fine, a big fine! LOL.

 

[WinSum]

Thanks, I wasn't sure.

Don't want a cell next to Martha Stewart for me, no matter how pretty the decoration is...

 

[TGregg]

But would they catch you? Hmmmm . . .

 

[GATrader]

Is'nt what you described above , in essence what these slp's are? The only difference is that brokerage # 2 is an independent BD not your own account.

 

[zdreg]

Quote from GATrader:

Is'nt what you described above , in essence what these slp's are? The only difference is that brokerage # 2 is an independent BD not your own account.

what does slp stand for?

 

[Sanjuro]

Long and short the same stock, different accounts.
So you sell your long when you want to go short
and don't have to worry about the uptick rule.
And that's illegal by the way.

Good Luck!

 

[GATrader]

Sanjuro, that thing you described was done in the late 90's by the SOES shops. I recall it was termed something ... box. Not sure of exact terms. Some even had the long stock in wife's account, short stox in trader's still illegal.

I don't know what slp's stand for. do a search here in ET. Lot's of commentaries from people who know a little ( like me) , no comments from people who know a lot. My guess... people who know a lot have spent considerable $ getting legal clearance and don't want to tip the other firms who don't know about them or don't want to spend $ getting leagal opinion..

 

[cuz]

Quote from WinSum:

Please comment if the following hypothetical transaction violates any SEC rule, Exchange/ECN rule or ethics.


Premise: It is differcult to short NYSE stocks that are free-falling because of the down-tick rule.

Possible Trading Solution:
1. Open 2 brokerage accounts.
2. When you want to short a NYSE stock on a downtick, use Brokerage Account #1 to initiate a short position.
3. Route Brokerage Account #1's Short Sell order to ISLD ECN and let it sit there on the Offer.
4. Use Brokerage Account #2 to buy the Short Sell order that you left on ISLD ECN
5. Turn around and hit NYSE bid with the Sell order from your Brokerage Account #2. (You don't violate the downtick rule because Brokerage Account #2 is Long on the stock)

This in effect has a wash transaction on Brokerage Account #2 but you will have initiated short position on Brokerage Account #1 in spite of a downtick.

What do you think ? Would this hypothetical transaction be considered as manipulation or unethical since part of this transcation requires you to buy and sell to yourself.

Dude if you trade the same stock/ stocks regularly, by a conversion. Totally legal! And the cost is cheaper if spread out over a longer time period.

Hope that helps