[HN Gopher] Naked shorting: The curious incident of the shares t...
___________________________________________________________________
Naked shorting: The curious incident of the shares that didn't
exist (2005)
Author : anaphor
Score : 146 points
Date : 2021-01-31 20:34 UTC (2 hours ago)
(HTM) web link (web.archive.org)
(TXT) w3m dump (web.archive.org)
| tecc501 wrote:
| BUY THE DIP
| tecc501 wrote:
| to the moon
| tristanj wrote:
| Non-archive.org version:
| https://www.euromoney.com/article/b1320xkhl0443w/naked-short...
|
| The "self-replenishing pool" missing image is available here:
| https://web.archive.org/web/20201104113520im_/https://cdn.eu...
| anaphor wrote:
| Thanks, maybe a mod can edit the url in the original post?
| setr wrote:
| Especially needed here because the way back link is broken
| into 6 pages, and page 2 wasn't captured (didn't check 3-6,
| since it doesn't matter)
| Lazare wrote:
| Summary:
|
| Every so often, someone gets very steamed about short selling,
| often with no real reason. Back in 2005, someone got very steamed
| about short selling, and then got a journalist to write a
| somewhat confused article about it. It's not clear anything was
| actually wrong then, but in any case, the rules have been changed
| a few times since then, so there doesn't seem to be any obvious
| relevance to current times.
|
| It's also worth noting that there's no real theoretical basis for
| why naked short selling would be harmful, no real empirical
| evidence showing it is harmful, no general laws against it, and
| the structure of the market allows and expects it to take place
| in some specific cases. If your mental model is that the stock
| market is a tool to allow people to trade a fixed number of
| concrete objects back and forth, this probably seems odd, but
| since that's not really a good model of how the stock market
| works or is intended to work, it's not clear that means much.
| Tokelin wrote:
| What would be a better model for how the stock market works?
| dleslie wrote:
| When it's not the purchase-a-thing model it's otherwise-
| disinterested third parties making large bets on possible
| future outcomes. It has more in common with a bookie's ledger
| than a warehouse of goods.
|
| Why this is often harmful and dangerous is that the financial
| viability of businesses and individuals are often backing
| these bets. A person or company expecting financing to be
| predictable and stable may suddenly find it not so because
| their lender is desperate to cover their gambling losses.
| harikb wrote:
| Very interesting indeed..
|
| > The stock borrow programme at the DTCC, they allege, enables
| the naked shorting of shares to the extent that the number of
| shares in circulation of some companies is now several times in
| excess of that issued. Even companies listed on the NYSE, could
| have been affected. As Wes Christian, partner in law firm
| Christian, Smith & Jewell in Houston, and lead lawyer on several
| of the cases, explains: "With the revelation of the Regulation
| SHO Threshold Securities list and the Leslie Boni report,
| published in November 2004 [see glossary], it is now crystal
| clear that this problem of naked short selling is systemic in
| Wall Street, and virtually impacts every business sector on every
| exchange including numerous billion-dollar companies listed on
| the NYSE and other companies listed on the Amex."
| crb002 wrote:
| When I was in PFG Marketer Services I saw million dollar double
| payout fuckups all the time and a shady SQL Server database for
| "manual over-rides" on commissions to brokers that seemed like
| an un-audited slush fund.
| anonymouse008 wrote:
| Now dark about dark pools and see how far up we really are
| d0mdo0ss wrote:
| off topic, but I'm curious what would've been a typical
| workday there.
| yourapostasy wrote:
| Someone reading that might be wanting to ask the same
| hoping to hear salacious "hookers and blow" Wolf of Wall
| Street legendary stories, but usually the reality is pretty
| mundane. Corruption is endemic to highly successful niche
| adaptations, but their yields rarely give rise to
| outlandish behavior. We see that a lot in breathless news
| stories, but that's just what sells ads.
|
| Most corruption happens in a matter-of-fact, business-as-
| usual, we're-all-in-this-together atmosphere. And the
| proceeds don't usually lead to blowout lifestyle
| extravaganzas, as most participants are clever enough to
| realize that draws unwanted scrutiny. That is what makes
| corruption so insidious and difficult to root out. The rot
| spreads slowly, and inspection is commonly asymmetrically
| more difficult and costly to mount than undertaking the
| corruption act itself.
|
| The most reliable way of rooting out corruption I've seen
| is an organizational culture that nurtures trust between
| leadership and organizational members, equitable gains
| sharing (so members feel they have skin in the game), and
| fiercely protecting whistleblowers (where the vast majority
| of human organizations utterly fail). Personally, Dunbar's
| Number appears to be some kind of (hopefully) local optimum
| but I'm curious how Geoffrey West's findings of scaling
| square with corruption incidence and scale.
| PragmaticPulp wrote:
| Recent events have a lot of people confusing high short interest
| with naked shorting.
|
| A stock can have short interest greater than 100% without any
| naked shorting.
|
| How is this possible? The textbook definition of a "short sale"
| is that someone borrows stock and then, literally, _sells it_
| short. The buyer of the stock is free and clear to do whatever
| they want with the stock, including re-lend it for another short
| sale. Wikipedia has a good primer on how this works:
| https://en.wikipedia.org/wiki/Short_(finance)
|
| This has created a lot of confusion on WallstreetBets, where many
| participants have come to believe that Gamestop's short interest
| of 113% means that there are 13% more shares shorted than long
| positions to cover. It's not true, though, because the long
| interest is always greater than the short interest.
| anaphor wrote:
| If you look at the SEC data on FTDs, there have been a huge
| number of them for GME in the past year
| https://www.sec.gov/data/foiadocsfailsdatahtm
|
| So that kind of points towards a possibility of naked shorts,
| if I understand correctly (although by itself it doesn't prove
| it's happening).
| Traktor wrote:
| I dont understand how the new owner of the stock can "re-short"
| it. Could you maybe explain? :)
| jaycroft wrote:
| I borrow your car (and you even give me the title!), promise
| to return it to you (but not necessarily the same car, just
| the same make and model), and then I sell what is truly now
| _my_ car to someone else. That new owner could then find
| someone else to lend the car to, transfer the title on a
| promise that they 'll eventually transfer the title back, and
| then let the new borrower sell it, transfer the title, etc.
| There's only ever one title and one car, but there are a lot
| of promises to return the car back later. When you explain it
| with goods it becomes obvious that a fraud was perpetrated if
| the buyers don't realize that the car might be owed to
| someone else. Yay for financialization and long impenetrable
| terms of service agreements with your broker where you
| automatically allow your broker to "lend" and re-title your
| shares so that they can earn interest on the lending.
|
| This is a simplification though, there's actually like a
| parking garage involved (broker) who says to trade on his
| exchange that the broker will keep your title safe for you -
| it's better than a paper certificate to hold in your safe at
| home because it can't get lost! But this allows the parking
| attendant to sell your car hoping you wont notice, and hoping
| that he'll be able to buy another similar car back before you
| actually ask for yours back. And of course insurance
| companies, auto dealerships, etc, but you get the idea.
|
| Robinhood's genius is hiding this complexity from their users
| behind a slick "gambling is fun" style app. TD Schwab ETrade
| and other "adult" brokerages also don't make it obvious, but
| at least they make you "read" some documents that explain the
| details before you get an account.
| PragmaticPulp wrote:
| The linked Wikipedia page has a graphic that explains it
| better than I can in text:
| https://en.wikipedia.org/wiki/Short_(finance)
|
| Basically, a short sale is a 3-party transaction. The first
| person lends their shares to the short seller. The short
| seller then sells the shares to another buyer. The original
| owner is still owed 1 share, which the short seller must
| later buy.
|
| In other words, you can't have a short sale unless someone
| buys the shares from the short seller. That new purchaser,
| who has the stock, is long.
|
| The key is that there are 2 people with long interest and 1
| person with short interest. The short seller must pay borrow
| fees to the lender for the privilege of selling the shares
| short, otherwise there's no reason to do it.
| jaycroft wrote:
| And just for completeness on your comment, a naked short is the
| same as a regular short, but in the opposite order. First sold
| short, then borrowed after the fact.
| throwawaysea wrote:
| Note that there are a lot of conspiracy theories going around on
| WSB, populist leftist Twitter, and populist right wing Twitter.
| For example,
| https://www.reddit.com/r/wallstreetbets/comments/kr98ym/gme_...
|
| With GME there isn't evidence of naked shorting. There are
| legitimate ways for shorts to be greater than the float. See
| https://seekingalpha.com/instablog/6850771-bachhandel/554975...
| for an explanation
| rybosworld wrote:
| The very high rates of failure-to-deliver on GME are in fact,
| suggestive of naked shorting.
| GizmoSwan wrote:
| I wonder if it is more likely to happen with put options that are
| rolled over. I don't believe that options are match with number
| of shares.
|
| Block chain type code can prevent the excess being issued.
| fractionalhare wrote:
| Should have a [2005] in the title. This is probably showing up on
| HN because naked short selling is topical, but the information in
| the article might be misleading if it's out of date.
| dalbasal wrote:
| This is basically a crosspost from reddit.
|
| /wallstreetbets are, in their own insane way, doing research
| into the most extreme tactics that short sellers have employed
| in the past.. expecting the entire arsenal to be employed
| tomorrow when trading begins.
| cheschire wrote:
| Honestly when I saw this link prior to the edit it was less
| interesting due to how topical it was. Now it's more
| interesting and carries an historical aspect.
| dalbasal wrote:
| I expect that ongoing events are actually more historically
| significant than this one.
| eloff wrote:
| Wow, how has nobody noticed this before? This looks seriously
| rotten:
|
| > Michigan-based entrepreneur Robert Simpson decided to see what
| would happen if he bought the entire stock of one company. Using
| a single broker, within a couple of days Simpson had paid a
| little over $5,000 for 1,285,050 shares in OTC bulletin board
| property-development company Global Links. According to Simpson,
| these shares were delivered into his account shortly afterwards.
| Yet the following day 37,044,500 Global Links shares were traded
| on the bulletin board. The next day, 22,471,000 shares were
| traded. On neither day had Simpson traded a single Global Link
| share, he insists. And events surrounding Simpson's investments
| became yet more confusing. Global Links had only ever issued
| 1,158,064 shares. Simpson had managed to acquire 126,986 shares
| that did not exist. How he had managed to be sold more shares
| than were in issuance is exactly the question Simpson hoped his
| foray would raise.
| LatteLazy wrote:
| His broker lent the stock back out. This is one more way
| brokers make a living: charging rent for shares lent to shorts.
| ketamine__ wrote:
| So what would have happened if he sold them all at the same
| time?
| LatteLazy wrote:
| His broker can recall the lent stock, so they'd recall it
| and have it sent to whoever bought it on their/his behalf.
|
| I worked on a computer system to handle all this for a
| while. It was front office so as well as buy/sell
| transactions we had to process lend/return and
| borrow/return actions to actually understand the company
| position.
|
| Within each of those are lend request messages with
| approval/declines etc.
| femto113 wrote:
| There were some compounding factors for this situation, in
| particular a reverse split.
|
| "Global Links was caught off guard by the events that
| transpired in February 2005 when it implemented a one-for-350
| reverse split of its stock, the result of which would reduce
| its float from 350 million shares to 1.1 million. ... Some have
| said it is all a simple matter of broker error. Accounts
| showing 350,000 old shares of Global Links should have been
| adjusted by the broker to show 350 [sic, should be 1000?] of
| the new shares, but some have said that didn't happen"
|
| https://www.forbes.com/2006/08/25/naked-shorts-global-links-...
| fractionalhare wrote:
| It was noticed. The SEC even had data supporting Global Links'
| claims. This incident is almost 16 years old and was later
| investigated by the SEC.
| eloff wrote:
| So do you know what was the outcome then? Are there
| mechanisms to prevent this now? Did the players involved get
| fined?
| fractionalhare wrote:
| I don't know the outcome of their investigation on this
| specific incident, and I can't (quickly) find it. But I
| know the SEC made a few changes in the mid - late 2000s as
| a result of naked short selling rising to mainstream
| awareness:
| https://www.sec.gov/news/press/2009/2009-172.htm. It became
| a pretty big point of discussion for regulating Wall Street
| which was amplified in the fallout of the 2008 financial
| crisis.
|
| As far as outcomes go, there is this testimony from the SEC
| chair circa 2010: http://fcic-
| static.law.stanford.edu/cdn_media/fcic-docs/2010...
|
| _> In July 2009, the Commission adopted a rule which
| requires that "fails to deliver" in all equity securities
| be promptly closed out. "Fails to deliver" may, among other
| things, be indicative of potentially abusive "naked" short
| selling. "Naked" short selling, which is not per se
| illegal, occurs when a short seller does not borrow
| securities in time to make delivery. Sellers may
| intentionally fail to deliver as part of a scheme to
| manipulate the price of a security or possibly to avoid
| borrowing costs. Data indicates that since the fall of
| 2008, fails to deliver in all equity securities have
| declined by 63.4 percent, and fails to deliver in
| securities with persistent and large levels of fails to
| deliver have declined by 80.5 percent._
| mcgoo wrote:
| If I recall, both stock and option market makers were
| allowed to fail to deliver, which would typically be
| cheaper than cost of borrowing, which made it another
| good source of edge that was unavailable to non-market
| makers.
| toast0 wrote:
| I don't know the specific outcome of this case. However,
| naked short selling is now prohibited by SEC regulation
| SHO, except for by 'bona fide market makers'.
| Broker/dealers have an obligation to fix failure to deliver
| by their clients with specific timelines; etc.
|
| Bona fide market makers have an exception, because their
| business is to always be being buying and selling around
| market prices, and in a market with lots of buy interest
| and less sell interest, they may need to sell more shares
| than they normally hold. Market makers still need to have
| the shares in time for settlement, which may require
| borrowing if they have net sales more than holdings in a
| given day, but they don't need to locate shares to borrow
| before selling. Market makers are given an exception,
| because liquidity is valued, and they need to be registered
| and have specific capital requirements etc.
|
| TL;DR, naked short selling isn't a thing anymore. There's
| been no reports of Gamestop shorts being naked shorts, and
| no reports of shares failing to deliver on time. Naked
| shorting isn't required for short interest to be over 100%.
| sweettea wrote:
| You might take aa look at the SEC's December reports of
| fail-to-delivers, before the GME rocket lit: there were
| three days with over a million shares failed to be
| delivered, and several more weeks with over .5%. WSB had
| a post encouraging everyone to file a SEC report over
| this back then.
| dmlittle wrote:
| My understanding is that the following situation can lead
| to a short interest of over 100%. Let's imagine a
| hypothetical world where there exists 1 share of a
| particular company and it is owned by Person A. Person B
| then borrows the share from Person A and sells it to
| Person C (this is the first short). Person C now owns 1
| share and Person A doesn't have a share but is
| contractually obligated to receive 1 share from Person B
| at a certain point in time in the future. Person D then
| borrows the share from Person C and sells it to Person E
| (this is the second short). Even though there only exists
| 1 share the short interest in this case is 200%.
|
| Now there are obvious reasons as to why this isn't a
| smart thing to do as recent events with GME show but it's
| not necessarily illegal (as far as I know). If this is
| actually not true or it's illegal somebody please correct
| me.
| rwmj wrote:
| I think the more interesting part of the story (if I'm reading
| it right) is he paid $5000 to completely own a company with
| millions in assets.
| pantalaimon wrote:
| is that really how it works?
| VBprogrammer wrote:
| Unless there was something fishy about the share classes.
| Non-voting shares perhaps?
| londons_explore wrote:
| Yes, but it's possible the company also had a bigger debt
| than assets and no hope of turning things around...
| sn_master wrote:
| Not sure about this case, but owning all trading shares
| doesn't mean owning the company. A company may have only 2%
| of its value as public shares and the rest owned by the
| company itself.
| [deleted]
| koolba wrote:
| If you own all the shares then you can control the company
| via voting control. That'd generally allow you to prevent
| the issuance of new shares and you could hand pick the
| board as their terms expire. It's not immediate, but you'd
| eventually be in control of everything.
| brockwhittaker wrote:
| Not all shares have voting power, and even so the voting
| power of those shares (if they were 2% of the company for
| example) may be proportionally tiny compared to the
| founders/board/execs.
|
| For example shareholders don't have any control at FB,
| since Mark controls 51% of the voting power.
| Ntrails wrote:
| Owning a controlling share, and owning company are not
| the same thing - even from a simple net worth point of
| view.
| njharman wrote:
| > own a company
|
| No "owned the publicly traded shares of a company". Those
| shares are almost certainly non-ownership, voting shares. And
| if they are it's possible/probable that
| founders/investors/others hold an arbitrarily large multiple
| of traded shares or options for shares or convertible bonds
| or whatever.
|
| What he owns is (somewhere in the line of creditors) the
| right to some part of assets if it's dissolved (sold, enters
| bankruptcy) exact triggers and rights are complex and varied.
| psychlops wrote:
| > What he owns is (somewhere in the line of creditors) the
| right to some part of assets if it's dissolved (sold,
| enters bankruptcy) exact triggers and rights are complex
| and varied.
|
| After all liabilities are deducted. Which usually means
| nothing.
| cush wrote:
| Were you able to access the entire article? I can only see page
| 1 of 6
| jkhdigital wrote:
| The perils of fractional reserve banking can arise in any
| centralized custodial arrangement. As long as no one performs a
| physical audit--or there is no physical object to be audited in
| the first place--then accounting fraud can and will happen.
|
| This is, in my opinion, the raison d'etre of blockchain. Public,
| immutable ledgers are immune to this kind of fraud (although they
| have other issues, of course).
| arcticbull wrote:
| Fractional reserve banking in the real economy is utterly
| irrelevant thanks to the FDIC backstopping a run. In the last
| [edit: 88] years nobody had lost a single penny to a bank run
| or default including 2008s WaMu default thanks to the FDIC.
|
| Crypto fractional reserve like tether has no backstop and
| that's a completely different beast. It's what exacerbated the
| Great Depression.
|
| As with all blockchain unless the state is 100% totally and
| utterly encapsulated within the blockchain, then it's garbage
| in, garbage immutably recorded. Which is why the only thing you
| can do with crypto is currency and kitties.
| erichocean wrote:
| > _In the last 100 years nobody had lost a single penny to a
| bank run or default including 2008s WaMu default._
|
| Debasement of the currency, however, has been...high.
|
| So you didn't "lose" that dollar from a hundred years ago,
| it's just worth about a penny now. Where'd the other $0.99
| go?
| arcticbull wrote:
| Another irrelevant talking point.
|
| The whole point of inflation is to encourage investment as
| money is only worth something as it flows through the
| economy.
|
| You're not supposed to save money under the mattress you're
| supposed to save value by purchasing assets. A hundred
| years ago buying roughly speaking any asset would have
| preserved your entire wealth or created tons of new wealth.
|
| Wages have on average kept pace with inflation.
|
| You keep a small slush fund for a rainy day in a savings
| account that at least partially offsets inflation and you
| invest the rest. You don't save money, you save value. You
| _transact_ money. If you're saving money you're doing it
| wrong.
|
| This is ECON101.
| tlb wrote:
| It's less than 100 years since thousands of banks collapsed
| in the early 1930s and most depositors lost their money. The
| FDIC was created in 1933 and has prevented losses since.
| arcticbull wrote:
| Indeed, I was rounding, and poorly at that. Thanks for the
| correction!
| PragmaticPulp wrote:
| > then it's garbage in, garbage immutably recorded.
|
| This is the major weakness of proposals to put everything on
| the blockchain.
|
| In real-world scenarios, accidents happen. Records must be
| corrected.
|
| Voting is a great example. If we moved voting to the
| blockchain, it wouldn't automatically solve fraudulent voting
| problems. It would just record fraudulent votes on the
| blockchain. If your grandma accidentally loses her private
| voting keys to hackers, do we just roll over and let the
| hackers vote as your grandma? Obviously not.
|
| Any future blockchain solutions to anything government-
| related will certainly have corrective measures and overrides
| overlaid on top. It's not like we're going to sit back and
| watch people lose their house because hackers stole the
| private keys to their property deed, or forbid someone from
| selling their car because they can't remember the password to
| their title wallet.
| nayuki wrote:
| Short-selling shares is basically a form of fractional
| reserve banking. A short squeeze is essentially equivalent to
| a bank run. Where is the FDIC helping to backstop a run on
| shares?
| ashtonkem wrote:
| From a social level, there is a _huge_ difference between a
| bank run and a short squeeze. One affects regular savings,
| the other wipes out only those that opted into a high risk
| short position.
| arcticbull wrote:
| It's not a bank run, it's poor risk management and the FDIC
| doesn't insure brokerages, that's the SIPC. Poor risk
| management is very much not covered by any federal program.
| Their liabilities are between them and their brokers, and
| if contagion spreads, their private insurers. This is why
| you can only short in a margin account and are required to
| put up collateral.
|
| If you sold short 140% of float and bought calls to cover,
| then we wouldn't be having this conversation. Play stupid
| games, win stupid prizes.
|
| Similarly if I bought a bunch of stuff on margin and it
| went under overnight, RIP my account. You can lose money in
| both directions.
|
| "140% of float" doesn't really mean more shares were sold
| than exist. There are after all only 100%. It means the
| same shares were sold more than once by the same or
| different people, and buying them back cancels the debt
| obligation.
| xadhominemx wrote:
| No blockchain would ever be able to keep with with equities
| trading
| arcticbull wrote:
| In which case of course the trading has to happen on totally
| unaudited, unauditable exchanges like Bittrex' (GME:USDT)
| pair and settled on the blockchain - which is absolute free
| for all in terms of shenanigans.
| beefield wrote:
| 1. Fractional reserve banking is _by definition_ decentralized.
|
| 2. Cough, Tether audits, cough.
| ryebit wrote:
| Not OP, but USDT / Tether is an example of something which
| exists as a proxy for something off-chain; so auditing the
| chain is obviously not going to work to see how much USD they
| actually have. Though it _is_ possible to provably audit
| exactly how many USDT are in circulation at any point.
|
| I think OP's point was more about things which exist entirely
| on-chain, i.e. the idea of having stock ownership tracked
| directly there (rather than as a proxy for real shares
| tracked somewhere else).
|
| In that frame, a better example is something like the DAI
| stablecoin, which is backed by assets that are on-chain. So
| at any block, you can audit exactly how many DAI there are,
| exactly which assets exist to back it, and exactly what the
| last reported oracle prices are for those assets.
| ryebit wrote:
| Just to expound on that point here.
|
| While Tether's bank accounts being private is a problem for
| auditing, even if that were removed, you'd still have to
| somehow "snapshot" all the bank accounts an transactions,
| freezing things in time so you could ensure there wasn't a
| shell game going on while you audited.
|
| This just isn't feasible with a federated system where each
| bank has their own ledger, and asynchronously tries to
| align it with a bunch of other ledgers.
|
| Blockchains overall _reduce_ throughput compared to this
| model, because they enforce a single ledger. But they do
| this while still preserving decentralized control,
| resulting in a tradeoff where you lose some scalability,
| but also remove need for a trusted mediator(s), _and now
| anyone can audit a snapshot of the state at their leisure_.
| andrepd wrote:
| Well fractional reserve banking _is_ accounting fraud.
| Widespread and legal, but fraud nevertheless.
|
| Also fractional reserve banking is a thing of the past. We've
| now evolved to _no reserve banking_. The banks ' ability to
| create money from thin air is almost unrestrained.
| arcticbull wrote:
| No it's not. It's legal and permitted and therefore not
| fraud. It's backstopped to prevent losses. This is a talking
| point with no basis.
|
| Let's stick to fact.
| kleton wrote:
| > As announced on March 15, 2020, the Board reduced reserve
| requirement ratios to zero percent effective March 26,
| 2020. This action eliminated reserve requirements for all
| depository institutions.
|
| https://www.federalreserve.gov/monetarypolicy/reservereq.ht
| m
|
| Not fraud though, because "When the president does it, that
| means it is not illegal"
| arcticbull wrote:
| It's not fraud in the same way going to prison isn't
| kidnapping.
| cccc4all wrote:
| The most important aspect of naked short selling is why it's a
| thing. Naked short selling is used as a weapon by short sellers.
| The purpose is to push down the stock price by artificially
| increasing supply relative to demand, perpetuating the sell
| spiral. Thereby, the short sellers can further increase their
| profit on short sales.
| [deleted]
| tpmx wrote:
| The full article (not just page 1 of 6) is available on the same
| euromoney.com domain today, but with a different URL:
|
| https://www.euromoney.com/article/b1320xkhl0443w/naked-short...
|
| Perhaps posting an archive.org URL adds a certain mystique,
| though?
| pengaru wrote:
| When the number of shares trading is no longer bound by the
| number of shares issued by the companies they're supposedly
| shares of, their value and thus price becomes completely
| meaningless.
|
| Perhaps you could normalize the price using short interest %, but
| that's not even reported real-time and would be an approximate at
| best estimation of how much inflation fuckery is going on with
| the # of shares.
|
| This whole thing reeks of corruption and manipulation IMHO, I'm
| shocked this isn't explicitly illegal and it's making me lose all
| interest in participating.
| nabla9 wrote:
| Note: Shorting more than 100% of shares outstanding does not
| imply that there is naked shorting happening. You can re-
| borrowing the shares someone shorted and it happens.
| [deleted]
| dalbasal wrote:
| It's times like this that common sense definitions of terms
| like "naked short selling," "market manipulation" and such turn
| out to be very different from the operable ones.
| kevinmchugh wrote:
| How does the common sense definition of "naked short" differ
| from the technical one?
| dcolkitt wrote:
| What is the common sense definition of "naked short selling"?
|
| I'd be shocked if the median American can even define short
| selling let alone naked short selling?
| psychlops wrote:
| Rehypothecation.
|
| Although, I think you'd be hard pressed to define the gray area
| of (possibly infinite) fractional share ownership and naked
| short selling.
| ouid wrote:
| I thought naked short selling was just short selling without a
| collar, which is what is actually causing the problems here.
| jeffbee wrote:
| Basic rule of thumb is any company where the management is
| whining about shorts, and about naked shorts in particular, is
| garbage. The reason companies get shorted over 100% of
| outstanding shares is because everybody agrees they are garbage.
| Not a conspiracy. Go look at the stock of the absurd company in
| question after you read this article.
| jeffbee wrote:
| Here's what Robert Simpson of ZANN Corp. was doing at the time:
| using his position in company A to buy his side gig company B.
| Whenever you dig into these guys for even 5 minutes they always
| turn out to be sleazy.
|
| https://www.lawinsider.com/contracts/Xj9WHIykaxCDFh0BX4XNQ/z...
| dtech wrote:
| How can you legitimately short a company for more than 100% of
| all shares in the market? The short has to be covered by a real
| share.
| jeffbee wrote:
| I borrow a share and I sell it and the buyer lends it to
| someone and they sell it. Now two borrowers owe two lenders
| the same share of stock. It's real straightforward when you
| think about it. Also has _nothing_ to do with "naked
| shorting" which is when you sell the share before you are
| able to borrow it.
| imtringued wrote:
| Why risk a short squeeze if it is easy money?
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