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Isn't Naked Shorting illegal?
- Thread starter midlifeguy
- Start date
Quote from hughb:
Yes it's illegal, but only enforcable against retail traders like me. My broker will not allow me to short anything if ther isn't stock to borrow. Exchange members can play games though, and they are the ones pulling shenanigans.
Well, I've been an exchange member since 1979 and we have to always locate stock to borrow. Even this era, we have to use the Goldman portal to locate stocks for our traders.
Don't get me wrong, I'm not saying that none of this goes on, I'm sure it does, but not necessarily by exchange member traders.
To make things worse, retail brokers keep all the interest money generated by their customers who do short stock (99% of the brokers anyway)...which is horrible IMO.
FWIW,
Don
Quote from nutmeg:
I wait with bated breath for my issue but if the article contains the words "Byrne, Weiss or Bobo" to the dump.. to the dump... to the dump dump dump....
Once again, my friend, I am not condoning any of this shorting behavior, just pointing out what we, as traders, must do.
Don
Quote from Don Bright:
Well, I've been an exchange member since 1979 and we have to always locate stock to borrow. Even this era, we have to use the Goldman portal to locate stocks for our traders.
Don't get me wrong, I'm not saying that none of this goes on, I'm sure it does, but not necessarily by exchange member traders.
To make things worse, retail brokers keep all the interest money generated by their customers who do short stock (99% of the brokers anyway)...which is horrible IMO.
FWIW,
Don
You aren't getting the locates you think. You're covered, but there's no way they really borrow those shares. They lend the same ones out over and over again. I can't tell you how I know, but Jim Chanos raised holy hell last year. He went after the brokers for overcharging for locates he says he never really got.
I recall GS taking a 1.3mm share position in OSTK at 21. The stock went right to 11. I don't believe that was a bad trade. I think they lent that out a few times over. We have, btw, people who used to run stock loan desks working with us. This is not a mystery, except to the public. Everybody else knows it goes on daily.
As a matter of fact, I was working with data from the last SEC dump. In one month, I think February, 62,000 instances and 17 billion, that's right, 17,000,000,000 shares failed. And that's an aggregate figure.
How would you fell Don, if you were public, and they raided you? Put a face on it, and it hits home. It is a horrible crime. End of Story.
nice read
First I think we have to define - illegal.
When you say illegal I believe you mean in violation of a criminal law.
I therefore have to ask - could you please point out the criminal code.
I was a member of an exchange and for a while we were shorting IPO's from the open. No one worried about lists of stocks for borrow only that we shorted upticks. (that is until one of the guys in our office bragged about how much money he was making doing it. Then the nasdaq put pressure on our exchange)
I am also know guys who worked at small brokerages who shorted the hell out of stocks without borrowing the shares because they were allowed to make markets. So it was not illegal for them.
Reg Sho - is a regulation - I do not think it is a statute with criminal penalties. If it were I would say it is unconstitutionally vague.
I am pretty sure it is not necessarily illegal to short and then fail to deliver. If it were illegal - I know plenty of traders who were allowed to break the law for years.
When you say illegal I believe you mean in violation of a criminal law.
I therefore have to ask - could you please point out the criminal code.
I was a member of an exchange and for a while we were shorting IPO's from the open. No one worried about lists of stocks for borrow only that we shorted upticks. (that is until one of the guys in our office bragged about how much money he was making doing it. Then the nasdaq put pressure on our exchange)
I am also know guys who worked at small brokerages who shorted the hell out of stocks without borrowing the shares because they were allowed to make markets. So it was not illegal for them.
Reg Sho - is a regulation - I do not think it is a statute with criminal penalties. If it were I would say it is unconstitutionally vague.
I am pretty sure it is not necessarily illegal to short and then fail to deliver. If it were illegal - I know plenty of traders who were allowed to break the law for years.