ULTIMATE HYPOCRISY: You can't 'naked short' certain equities, but 'Market Makers' can

[Mvic]

Quote from Maverick74:

Dude, they are referring to option market makers. If a MM buys 1000 ATM calls, he needs to be able to sell 5k shares of stock to hedge his position. I don't understand what your beef is. You think any MM will make a market in call options if he can't hedge his position? Are you insane?

So what if an MM sell 1000s of puts, now he can short the stock to his heart's content, limited only by the number of puts he can sell. I understand a legitimate MM's need to hedge but where is the check on the MM who is using this exemption to effectively naked short the stock. If he never has to borrow (just keeps selling puts) how are longs ever going to be able to take delivery especially when the MM can put on as many shorts as he wants, even more than the actual float if he wants swamping the trading of legitimate shares.

Isn't this fraud? The MM is essentially selling worthless paper if he can't locate like everyone else (and this is the solution to the problem, force the MM to locate), I don't care if he gets a week to do it but he should have to locate or close his position, hedge or not. Why is any exemption even needed for the MM, it might add some temporary liquidity to the market but at what cost to the market's function as a valid pricing mechanism?

 

[nutmeg]

MM who is using this exemption to effectively naked short the stock. If he never has to borrow
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Effectivly he has a naked short, he cannot lend it, it is against the law.

 

[ak15]

Quote from piezoe:

If you add up the number of shares sold short and it is greater than the number of shares issued, then you have definitely "unearthed" naked short selling.

Alas if it were that easy. Pray let us know if you have succeeded in this endeavor. The SEC will be eternally grateful to you.


"While no exact system of measurement exists, most point to the level of trades that fail to deliver from the seller to the buyer within the mandatory three-day stock settlement period as evidence of naked shorting. Naked shorts may represent a major portion of these failed trades."

Not one single instance has occured in the securities in question where there has been failure to deliver from the seller to the buyer within the three day settlement period.

From Cox's testimony to Senate:

"For several months, we have had other active investigations underway concerning the possible manipulation of securities prices through various combinations of manufacturing false rumors and short selling in a number of cases that may have contributed to the increase in market volatility that is impacting so many ordinary investors. In addition, the Commission has joined with other securities regulators in undertaking industry-wide sweep examinations that will include hedge fund advisors, aimed at preventing the spread of intentionally false rumors to manipulate securities prices. Our examiners will focus on whether firms and advisers have proper controls in place, and whether those controls are reasonably designed to prevent the intentional creation or spreading of false information intended to affect securities prices, as well as other potentially manipulative conduct."

It is clear from the above excerpt that there are only investigations being made "involving possible manipulation of securities through various combinations.............". There is no categorical affirmation by the SEC showing proof of rampant naked short selling.

A couple of informative tidbits although I don't perforce agree with everything these individuals assert particularly reinstating the NYSE's "upticik rule'.

http://finance.yahoo.com/tech-ticker/article/39463/Don't-Blame-the-Shorts!-SEC-'Witch-Hunt'-Misses-Real-Cause-of-Market-Ills?tickers=FNM,FRE,LEH,GS,MER,MS,JPM


http://www.foxbusiness.com/story/ma...-emergency-rule-limit-short-sales/-1293093339

 

[flytiger]

The previous post is totally erronious, but not at the fault of the poster. This massive cover up has been designed and perfected to give the illusion of delivery. I'm amazed we are this far.

XClearing is the answer. These trades don't get washed at the DTCC, they are kited between brokers. We have emails of a cusip change where the brokers are asking, 'well, we are failed 550,000 shares, and XXXXXXXXX is failed 550. Can't we just wash them out. ??"" Yeah, I know. Stupid. But, it's in the emals. And that's from six years ago.

http://www.sec.gov/foia/docs/failsdata.htm

Crummy data, and late. But, download it, and look at one month. One month I scoped was 62000 incidents and 17 billion shares. And that's aggregate. If they shorted 100,000 illegally, covered back 92,000 before the settlement, nothing shows. But the damage is done. They could have broken the stock down. And of course, the Optioni mm hedge isn't here. Oh, there's plenty of evidence.

 

[ak15]

Quote from flytiger:

The previous post is totally erronious, but not at the fault of the poster. This massive cover up has been designed and perfected to give the illusion of delivery. I'm amazed we are this far.

XClearing is the answer. These trades don't get washed at the DTCC, they are kited between brokers. We have emails of a cusip change where the brokers are asking, 'well, we are failed 550,000 shares, and XXXXXXXXX is failed 550. Can't we just wash them out. ??"" Yeah, I know. Stupid. But, it's in the emals. And that's from six years ago.

http://www.sec.gov/foia/docs/failsdata.htm

Crummy data, and late. But, download it, and look at one month. One month I scoped was 62000 incidents and 17 billion shares. And that's aggregate. If they shorted 100,000 illegally, covered back 92,000 before the settlement, nothing shows. But the damage is done. They could have broken the stock down. And of course, the Optioni mm hedge isn't here. Oh, there's plenty of evidence.

There is nothing erroneous about my post. Everything stated there is a fact except for the articles which I posted for informative purposes with the caveat that I disagreed with many of the points of view. My goal is to simplify things so that people can clearly understand the concepts being discussed. I believe that you and I are looking at things from different perspectives and vantage points and have varying premises.

 

[flytiger]

Quote from ak15:

There is nothing erroneous about my post. Everything stated there is a fact except for the articles which I posted for informative purposes with the caveat that I disagreed with many of the points of view. My goal is to simplify things so that people can clearly understand the concepts being discussed. I believe that you and I are looking at things from different perspectives and vantage points and have varying premises.

Not one single instance has occured in the securities in question where there has been failure to deliver from the seller to the buyer within the three day settlement period.

This post is totally erroneous. What did you think Cox saw in the real time data he possesses, and you will see in four months.

And again, it's not your fault. it's an orchestrated scam where you CAN'T see the fails, so you don't believe they are happening. But I believe Cox was at a crossroads and was forced to move. Now you must ask yourself, who made him blink, and how.

 

[nutmeg]

Not one single instance has occured in the securities in question where there has been failure to deliver from the seller to the buyer within the three day settlement period.
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Maybe for the securities in question. I find it hard to believe that when a stock trades 2-3 times its float in a day or over several days that this would not happen.

 

[ak15]

Quote from flytiger:

Not one single instance has occured in the securities in question where there has been failure to deliver from the seller to the buyer within the three day settlement period.

This post is totally erroneous. What did you think Cox saw in the real time data he possesses, and you will see in four months.

And again, it's not your fault. it's an orchestrated scam where you CAN'T see the fails, so you don't believe they are happening. But I believe Cox was at a crossroads and was forced to move. Now you must ask yourself, who made him blink, and how.

I'm not going to argue with you. I reiterate that what I've stated are facts. Your statements are hypothetical. To wit: Not being able to see the fails and your belief but not a fact that "cox was at a crossroads and was forced to move" etc.

Be that as it may, it is pointless to continue this discussion on my part.

 

[ak15]

Quote from nutmeg:

Not one single instance has occured in the securities in question where there has been failure to deliver from the seller to the buyer within the three day settlement period.
==================================

Maybe for the securities in question. I find it hard to believe that when a stock trades 2-3 times its float in a day or over several days that this would not happen.

I am referring to the securities in question. There are too many variables involved to make sweeping generalizations about securities as a homogenous group.

 

[riskfreetrading]

Quote from piezoe:

If you add up the number of shares sold short and it is greater than the number of shares issued, then you have definitely "unearthed" naked short selling.

I think what you wrote is FALSE

Why? The number of shares sold short can be greater than the number of shares issued even if there is no naked short selling.

If SEC wants to devise a way to control the number of shares sold short with comparison to the number of shares issued/float, there there is a way to do it.

I know how to do it, and it is easy to implement.