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Naked shorting: The curious incident of the shares that didn't exist (2005)

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Re: Naked shorting: The curious incident of the shares that didn't exist (2005)

#151

Post by jkhdigital »

fractionalhare wrote: post #107
jaycroft wrote: post #67

Earlier quoted context omitted.

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.

Not necessarily. As long as the borrower commits to borrow the stock at a determined point in the future which the broker legitimately deems should have borrow liquidity (availability of shares to borrow), the short sale is not naked. And interestingly enough, if this transaction occurs in good faith and for unforeseen reasons there is no borrow liquidity at the agreed upon time, a fail to deliver will occur despite…

That... seems gimmicky. Like using repurchase agreements to pretend that your balance sheet looks cleaner than it actually is.

Re: Naked shorting: The curious incident of the shares that didn't exist (2005)

#152

Post by CTDOCodebases »

fractionalhare wrote: post #98
sweettea wrote: post #69

Earlier quoted context omitted.

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.

You should cite the posts and resources you've mentioned, because there are a variety of caveats that approximately all the posts on WSB misinterpret. People will fly by a comment like this and just repeat it without any fact checking. The very page you describe specifically states that you can't infer when failures to deliver occurred because the data is reported in aggregate with no age statistics. [1] Moreover fai…

Regarding the data in question you are completely right but the unusually high numbers reported suggest possible naked short selling or a systematic lack of liquidity for that particular stock.

If what’s going on is naked short selling by those who are not market makers then it’s illegal and those who are doing it need to be prosecuted.

If what’s going on is due to a lack of liquidity then it suggest that price manipulation could be occurring in the form of excessive coordinated short selling.

Finally - why assume a government agency is competent and has the means and resources required to act in a timely manner? The issue was reported though. [0]

[0] https://www.reddit.com/r/wallstreetbets/comments/kr98ym/gme_...

Re: Naked shorting: The curious incident of the shares that didn't exist (2005)

#153

Post by erichocean »

arcticbull wrote: post #132
IG_Semmelweiss wrote: post #129

Earlier quoted context omitted.

I respectfully disagree. The whole point of inflation is to monetize the crazy debt spirals by empires. Its why the romans did it, why the Germans did it, why the british did it , and its why we do it. It doesn't take an econ degree to know that. That was the reason the gold window was closed in the first place. If the whole point of inflation, mind you, is to encourage investment, then why does the fed react by spik…

>>> Gold Window The gold window was closed because gold was garbage money. A money supply you can’t adjust cannot respond to shocks and it can’t respond to changes in the economy or society. The crash in 2008 and again now would have been much much much worse without an ability to control supply. Inflation is defined in terms of supply and velocity. Velocity plummeted so supply was raised to offset and lo and behold…

> The gold window was closed because gold was garbage money.

The gold windows was closed because the French decided to redeem their dollars for gold, and due to the rampant debasement of dollars, there wasn't enough gold available to do so.

Source: history.

Re: Naked shorting: The curious incident of the shares that didn't exist (2005)

#154

Post by wcoenen »

xadhominemx wrote: post #24
jkhdigital wrote: post #10

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).

No blockchain would ever be able to keep with with equities trading

It is being tested already: https://www.globalcustodian.com/paxos-teams-credit-suisse-in...

Re: Naked shorting: The curious incident of the shares that didn't exist (2005)

#155

Post by im3w1l »

cstrat wrote: post #87
PragmaticPulp wrote: post #42

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…

In addition to the shorts, when people buy call options - doesn't that mean someone else is on the hook to provide shares at a later date, and they might not hold them at the time of selling the option?

Yeah but it's not like anyone would exercise out of the money options *nervous laughter*. Though theorethically, with enough options it could cause the same effect as a short squeeze, where the exercise drives up the price to make them in the money.

Re: Naked shorting: The curious incident of the shares that didn't exist (2005)

#156

Post by gruez »

oblio wrote: post #118
dleslie wrote: post #66

Earlier quoted context omitted.

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 fin…

I still don't understand why these kinds of derivatives are not banned. They're, as you described, basically betting. Except for a handful of folks, everybody loses money on them. The ones that do make money are rigging the game (à la casinos) or are just lucky. Some of the lucky ones have been lucky for decades, some even went bankrupt after being lucky for so long.

Insurance is basically a bet that your house will go on fire, and everybody loses money on them (expected value). Should they be banned as well?

Re: Naked shorting: The curious incident of the shares that didn't exist (2005)

#157

Post by esrauch »

LatteLazy wrote: post #137
esrauch wrote: post #115

Earlier quoted context omitted.

I don't understand how this can work. The broker loans the share to person B. Person B sells the share to person C (as B wants to short the stock). How can the Broker recall the share: they have no relationship with the current owner of the stock. Even if the broker demanded B rebuy a share to return the stock, since the original guy owner all liquid shares, it would only take one other share holder to holdout to mak…

The Broker calls Person B. Person B has 1 day to get the share back or they're in default. It's up to Person B to buy back from whoever is selling at whatever price they want. It is possible for short sellers to get caught as you describe (someone owns all the stock and they have bought 1 additional share and now wont sell). But it's very rare. It requires a few things to all happen at the same time: * 1 person has t…

But as the original stock holder what happens when if the loanee defaults? The broker just calls you up and says "you had the share in your account but we lost it, here's some money for your troubles?"

It seems like the holder wouldn't care if they were just selling it, but if you were transferring the stock out to another brokerage, they just give you the alleged ask price of the shares (which actually doesn't exist because the shares are illiquid) because they made a mistake and lost your shares?

I also find this confusing for voting rights: if my brokerage is loaning out my shares without my knowledge, then I don't actually have the voting rights that I think I do, since the share is actually held by someone else?

Re: Naked shorting: The curious incident of the shares that didn't exist (2005)

#158

Post by arcticbull »

erichocean wrote: post #153
arcticbull wrote: post #132

Earlier quoted context omitted.

>>> Gold Window The gold window was closed because gold was garbage money. A money supply you can’t adjust cannot respond to shocks and it can’t respond to changes in the economy or society. The crash in 2008 and again now would have been much much much worse without an ability to control supply. Inflation is defined in terms of supply and velocity. Velocity plummeted so supply was raised to offset and lo and behold…

> The gold window was closed because gold was garbage money. The gold windows was closed because the French decided to redeem their dollars for gold, and due to the rampant debasement of dollars, there wasn't enough gold available to do so. Source: history.

Sure and so it was garbage money; good money never had this problem yeah?

Re: Naked shorting: The curious incident of the shares that didn't exist (2005)

#159

Post by gruez »

ralph84 wrote: post #114
nabla9 wrote: post #26

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.

Correct, but consistent fails to deliver over a period of many months certainly does.

AFAIK the problem with that figure aggregated so that you don't know who did it and which side they're on. That means you can't tell whether it's just background noise, or a specific person constantly failing to deliver a short.

Re: Naked shorting: The curious incident of the shares that didn't exist (2005)

#160

Post by fractionalhare »

emmelaich wrote: post #138
fractionalhare wrote: post #98

Earlier quoted context omitted.

You should cite the posts and resources you've mentioned, because there are a variety of caveats that approximately all the posts on WSB misinterpret. People will fly by a comment like this and just repeat it without any fact checking. The very page you describe specifically states that you can't infer when failures to deliver occurred because the data is reported in aggregate with no age statistics. [1] Moreover fai…

Your words aren't that reassuring, since this is the same SEC that failed to find Madhoff's Ponzi scheme.[0] > since 1992, there had been six investigations of Madoff by the SEC, which were botched either through incompetent staff work or by neglecting allegations of financial experts and whistle-blowers [0] https://en.wikipedia.org/wiki/Bernie_Madoff

Sure, but I'm not trying to be reassuring. I'm trying to encourage healthy skepticism of random claims on the internet.
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