Illegal Short Sale Debacle - HELP!!
- Thread starter Marc to Market
- Start date
I know your broker is not IB, but consider this:
IB makes it plain and clear in their agreement that if a trader takes a position that he is not allowed (I think meaning under-margined) then IB is responsible for any profit OR loss.
So you might want to look into this with someone who knows the law. I suspect, by law the broker is responsible for letting a trader do things that he shouldn't be able to. Anyway, if I was in your shoes, I certainly talk to a lawyer about this, and see what the dealeo is.
IB makes it plain and clear in their agreement that if a trader takes a position that he is not allowed (I think meaning under-margined) then IB is responsible for any profit OR loss.
So you might want to look into this with someone who knows the law. I suspect, by law the broker is responsible for letting a trader do things that he shouldn't be able to. Anyway, if I was in your shoes, I certainly talk to a lawyer about this, and see what the dealeo is.
Just buy 15k monday morning when it trades post split.
Your 300k will settle, reverse split to 15k and be offset with the 15k long and have the broker pair off the shares. You will be flat.
Next time don't post an illegal transaction on a public message board, as the SEC can fine you for illegal short sales.
Your dumb ass broker should have told you how to get out of it but I bet the customer support guy there was putting on his zit cream.
Your 300k will settle, reverse split to 15k and be offset with the 15k long and have the broker pair off the shares. You will be flat.
Next time don't post an illegal transaction on a public message board, as the SEC can fine you for illegal short sales.
Your dumb ass broker should have told you how to get out of it but I bet the customer support guy there was putting on his zit cream.
I have very little experience in the market as I just opened an account two weeks ago and I'm just learning how the market works but EBO sounds like he has the right idea. First thing Monday morning I would call alot more than just one firm so you get a bigger picture and a clearer understanding of what you can do.
Then I would call you broker and try to work something out with him if he's any good you and him should be able to come up with some good ideas and if you don't get anywhere with him or if you have a feeling he's trying to screw you then go over his head and ask to speak to someone in charge and if you don't get anywhere with that person call your lawyer and see what he says because there gotta be something you can do.
One more thing keep checking this post because alot of people in here have alot of good info and would be willing and able to help you by giving you some good advice and the rest of the ones that might screw with you or laugh don't sweat it there just clowns. Let me know what happens and good luck and you'll figure something out I'm sure of it because after all everyone makes mistakes and accidents do happen and again GOOD LUCK.
Then I would call you broker and try to work something out with him if he's any good you and him should be able to come up with some good ideas and if you don't get anywhere with him or if you have a feeling he's trying to screw you then go over his head and ask to speak to someone in charge and if you don't get anywhere with that person call your lawyer and see what he says because there gotta be something you can do.
One more thing keep checking this post because alot of people in here have alot of good info and would be willing and able to help you by giving you some good advice and the rest of the ones that might screw with you or laugh don't sweat it there just clowns. Let me know what happens and good luck and you'll figure something out I'm sure of it because after all everyone makes mistakes and accidents do happen and again GOOD LUCK.
def
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Quote from Marc to Market:
Thanks for the suggestions guys, but:
a) I don't have enough money in my account to go long 15k shares post-split.
b) Let's say I go long 15k shares to hedge the illegal short. If the stock tanks, I will lose money on the new long position but won't be able to profit on the short since it was illegal...
My broker is closed until Monday.
what do you mean you don't have the money? you are short the stock, thus you must have the funds to cover the short - i.e. the proceeds from the short should be available to cover the short as you can only short from a margin account. your broker should actually be buying you in, you're lucky that they seem willing to let you work the order.
If you don't know another compliance officer you can find to talk to Sunday, then plan on getting up early Monday and speak to the compliance officer at your firm before the market opens. Don't bother talking to your broker unless you have trouble getting the compliance officer.
From def's post it sounds like they should be able to find some way for you to get out of this mess first thing Monday. Hopefully, the stock will open gap down Monday and you can get covered. If they won't give you the buying power to buy the stock, try to explain how allowing you to put on this short in error is as much their fault as yours.
From def's post it sounds like they should be able to find some way for you to get out of this mess first thing Monday. Hopefully, the stock will open gap down Monday and you can get covered. If they won't give you the buying power to buy the stock, try to explain how allowing you to put on this short in error is as much their fault as yours.
Quote from Marc to Market:
Thanks for the suggestions guys, but:
a) I don't have enough money in my account to go long 15k shares post-split.
b) Let's say I go long 15k shares to hedge the illegal short. If the stock tanks, I will lose money on the new long position but won't be able to profit on the short since it was illegal...
My broker is closed until Monday.
M to M, From experience as former OTC market maker I'll tell you this; As long as you inform the broker it was an error, and tell them to inform the NASD Market Survelance dept. that a customer had an error - It sounds like a believable one, because you were long, then you should be able to keep the trade. The reasons you gave were not for no locate but for fairly trivial reasons (in their eyes) like not on a plus or marking the ticket correctly - these are all the more reasons to believe it was a mistake. These guys are right, you will be able to buy 15m shares of the new stock and not be expected to put up additional funds because the two securities are "fungible" or are in essence the same security. AS long as you are up front with NASD they are fairly "human" about these types of errors. It won't appear to them that you were trying to cheat the system. It sounds like you are caught up in your brokers own onerous house rules which are in place to protect them from abuses. One more piece of advice. Tell the broker that this is the case and just don't take no for an answer. Seriously! Tell them to tell the NASD and don't take NO. Good Luck!
Because of the split the stock may be on the "Hard to Borrow" list. If this is the case they (both the broker and NASD) may be slightly less tolerant of the error. All Stock Loan departments have this formal list and you can't short these stocks. Being under $5 just means that its not marginable. You can short a stock at a penny if its borrowable.
(2) $2.50 per share or 100 percent of the current market value, whichever amount is greater, of each stock "short" in the account selling at less than $5.00 per share;
Actually got this from the NASD web site under Margin Rules. We're talking about shorts here right? Not only are they NOT marginable, but if the stock is under $5 you still have to put up a MINIMUM of $2.50 per share. Therefore the amount of margin required for your 'error' is actually $750,000. Wow!! Sorry dude, now I see why they're so pissed. - Good Luck!
Actually got this from the NASD web site under Margin Rules. We're talking about shorts here right? Not only are they NOT marginable, but if the stock is under $5 you still have to put up a MINIMUM of $2.50 per share. Therefore the amount of margin required for your 'error' is actually $750,000. Wow!! Sorry dude, now I see why they're so pissed. - Good Luck!