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

I'm definitiely not an expert on everything to do with the market, but it appears to me the outcome of the new regs will be to stop the practise rinse and repeat with the 3 day SS expemption loophole.

And IMO this is what they are designed to do rather than to curb the efficient workings of the market.

I was short on the markets last night but was definitely not aggressive, largely because I was uncertain of how the new regs would affect things. While 1 person doesn't make any difference, if there is enough uncertainty right through the food chain it does make a difference.

Market manipulation is definitley illegal but remember markets have the potential to be manipulated in both directions.

If they wanted to reduce volatility they should go back to the old uptick rule. I seem to remember they introduced it to reduce volatility doesnt seem to have been that successful.

Cheers
 
It amazes me how people on this thread still don't understand the concept of short selling and naked short selling.

Let me try this one more time and let me keep the math simple. Say Company XYZ has 10 million shares in the float. Then hedge fund ABC comes along with the stock at $20 a share and decides to drive the stock to 0 after they have taken a legitimate short position of say 500k shares. So they go into the market place and sell 50 million shares. Now one of two things will happen. Either the stock will go to zero or someone will actually come in and be the counterparty to these sales. Now, let's say mutual fund DEF comes along and buys 50 million shares from fund ABC.

Now here is the question. What does DEF actually own. Assuming ABC was able to get off 10 million shares of available stock, where is the other 40 million coming from? Fund DEF doesn't own anything. They think they own 50 million shares of stock XYZ. But what they really own is 10 million shares of stock and 40 million shares of worthless paper. So now fund DEF requests the actual stock certificates and there are none to be had for the other 40 million shares.

Are you guys starting to see the problem now? What the f*ck did DEF buy? They wrote a check for 100's of millions of dollars to buy stock. But they only own 10 million shares, not 50 million!!!

It doesn't take a genus to see the danger on this and why the SEC requires the shares to actually be located within 3 trading days. If you guys still don't get it after this example, then it's pointless to really carry on this conversation.
 
Quote from Maverick74:

It amazes me how people on this thread still don't understand the concept of short selling and naked short selling.

Let me try this one more time and let me keep the math simple. Say Company XYZ has 10 million shares in the float. Then hedge fund ABC comes along with the stock at $20 a share and decides to drive the stock to 0 after they have taken a legitimate short position of say 500k shares. So they go into the market place and sell 50 million shares. Now one of two things will happen. Either the stock will go to zero or someone will actually come in and be the counterparty to these sales. Now, let's say mutual fund DEF comes along and buys 50 million shares from fund ABC.

Now here is the question. What does DEF actually own. Assuming ABC was able to get off 10 million shares of available stock, where is the other 40 million coming from? Fund DEF doesn't own anything. They think they own 50 million shares of stock XYZ. But what they really own is 10 million shares of stock and 40 million shares of worthless paper. So now fund DEF requests the actual stock certificates and there are none to be had for the other 40 million shares.

Are you guys starting to see the problem now? What the f*ck did DEF buy? They wrote a check for 100's of millions of dollars to buy stock. But they only own 10 million shares, not 50 million!!!

It doesn't take a genus to see the danger on this and why the SEC requires the shares to actually be located within 3 trading days. If you guys still don't get it after this example, then it's pointless to really carry on this conversation.
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The SEC hasn't actually unearthed naked short selling in these securities. They only suspect that such activities are the cause for driving the price of these securities down.

Speaking for myself I don't have any problems with the concept of naked short selling. I however believe that naked short selling is not the contributing factor for the accentuated downward spiral in the price of these instruments. Imo, it is the incessant shorting of these securities by investment banks and houses that is causing prices to fall. "Naked short selling" is not engaged in by these individuals representing their firms. They don't need to.

As an example: GS sells 500,000 shares short from his inventory . John Doe buys these shares in the market. He will have no problem getting the stock certificates because these shares are legitimately owned by GS representing its customer/customers.

Behavior such as the above renders the SEC impotent and ineffective since it is legitimate price manipulation engaged in by these elements due to the advantages they hold and abuse.

I might add that these entities collude with each other in facilitating such transactions.
 
Are there any Option market makers on this site looking for capital/investors who are trading the 'hard to borrow' stocks? Please PM me if interested. I'm talking reverse conversions. For those who know, you know what I mean.
 
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.
 
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.
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Cox has real time data. He knew if he didn't move, the financials were dead. So he had to admit to naked short selling and stop the 19. However, by allowing an exemption to the MM rule, he just condemned all 19 to death, because the hedgies will just pour on the puts, and it will be the same thing. At the end, the hedgies will say, 'but it was legal."

No guts. He needs to see the inside of a prison.
 
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.
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I'm curious as to where one might find a certifiable accurate number of shares sold short. Also, how might one reconcile shares sold short marked as long sales which administratively could happen.

How would one reconcile shares sold short "legitimately" against shares sold short in the course of business as an option maker.
 
Quote from nutmeg:

I'm curious as to where one might find a certifiable accurate number of shares sold short. Also, how might one reconcile shares sold short marked as long sales which administratively could happen.

How would one reconcile shares sold short "legitimately" against shares sold short in the course of business as an option maker.
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You can't. DTCC or SEC doesn't even allow the companies to know. There have been a myriad of actions against mismarking tickets. Small fine, see you next year.

Two things happen. Either the Feds move, and quickly, or in thirty days, no financials. If anyone was watching, Gasparino spoke about how small Lehman was vs these hedgefunds. These kind of firms can't withstand onslaughts by the Greenwich boys.

All anyone has to do is look at OSTK today. It was payback to Patrick. At about 1:23, 3,000 puts traded. I think October 10,s. and hour later, 300,000 shares . The shares are "legal" nakeds by the MM. But OSTK doesn't need money.

So they use puts to finish you off. The only way they are that brazen is they know they own the cops. You'll see this against any financial they want to target. Get the stock low enough, the financial, if it can, will have to raise money at a crazy price. If they do, the hedgies can use the stock to cover. If not, they'll be no value, the shareholders will be wiped out, 100% return. And there is nothing that can stop them.
 
Quote from Maverick74:

It amazes me how people on this thread still don't understand the concept of short selling and naked short selling.

Let me try this one more time and let me keep the math simple. Say Company XYZ has 10 million shares in the float. Then hedge fund ABC comes along with the stock at $20 a share and decides to drive the stock to 0 after they have taken a legitimate short position of say 500k shares. So they go into the market place and sell 50 million shares. Now one of two things will happen. Either the stock will go to zero or someone will actually come in and be the counterparty to these sales. Now, let's say mutual fund DEF comes along and buys 50 million shares from fund ABC.

Now here is the question. What does DEF actually own. Assuming ABC was able to get off 10 million shares of available stock, where is the other 40 million coming from? Fund DEF doesn't own anything. They think they own 50 million shares of stock XYZ. But what they really own is 10 million shares of stock and 40 million shares of worthless paper. So now fund DEF requests the actual stock certificates and there are none to be had for the other 40 million shares.

Are you guys starting to see the problem now? What the f*ck did DEF buy? They wrote a check for 100's of millions of dollars to buy stock. But they only own 10 million shares, not 50 million!!!

It doesn't take a genus to see the danger on this and why the SEC requires the shares to actually be located within 3 trading days. If you guys still don't get it after this example, then it's pointless to really carry on this conversation.
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So where do the FTDs that go on for months fit in this explanation?
 
Quote from Mvic:

So where do the FTDs that go on for months fit in this explanation?
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Quote from Mvic:

So what if a MM sell 1000s of puts, now he can short the stock to his hearts 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.
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EXACTLY.

I'm haven't resolved my preference should or shouldn't be legal. It's a complicated issue, and yes, good companies can be ganged up on and punished unfairly, just because they are thinly traded and therefore inherently vulnerable - this is especially true when there is concerted effort among many funds.

Before the SEC goes and adds another idiotic layer of regulation, and an arbitrary one at that (a list of 19 securities that only 'market makers' can short naked), they should GIVE THE TRADERS AND INVESTORS WHAT THEY'VE BEEN ASKING FOR FOREVER - A CRACKDOWN ON THE MASSIVE FRAUD THAT IS FTDs!!!!!!!!!

Useless, lame, impotent and incompetent (if not fraudulent) - that's the SEC.

Mav, your further explanation doesn't respond to an allegation I made earlier - do you or do you not think that the chosen few market makers that are exempt from the naked shorting rule on the new list of 19 will figure out how to arbitrage that exemption into a massive, profit making vehicle?
 
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