On a sidenote, I really like that site's design. Having just read about the Gemini project, I feel like we all should maybe tone down the web design a little bit.
Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation
51–60 of 403 posts
Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation
#52Earlier quoted context omitted.
> Why let people have incentives to ruin other people lives? We should build safety cushions for people, not companies. > Why do you feel you need to help it to go down? https://en.wikipedia.org/wiki/Wirecard_scandal
Fraudulent company is not a general case. Such companies must be closed by regulators, not short sellers. Do you think it is a good idea to help Intel go bankrupt because it's shitty right now in comparison to AMD?
> Do you think it is a good idea to help Intel go bankrupt because it's shitty right now in comparison to AMD?
Of course not. But if either one of them has secret bad information, it's good for everyone to have it revealed to the public so the stock price can be more accurate.
Fraud may be rare but companies have negative info all the time.
Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation
#53Counterfeit shares? Really? These are not really counterfeit shares, because they do not pay dividends or have any voting ability, the companies do not recognize them. More like "synthetic assets" that have the price pegged to the asset they mimic.
The author likely used the term "counterfeit" since they're essentially copying the shares and redistributing them as if they represent the same value as the original, just like counterfeit money.
The author likely used the term "counterfeit" to stir up a controversy.
It's more like if I started lending you some rocks, and told you that each rock is always 1 Tesla share. You can always come to me and cash in that rock for whatever a Tesla share is. I'm not lending you counterfeit Tesla shares, but rocks. There's no counterfeiting going on.
Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation
#54The author seems to be really upset about this, but I don't understand why. Nothing they are describing, if you ignore histrionic language like "counterfeiting", seems especially nefarious. Maybe I am misunderstanding. Basically, a short is when A borrows from B a share of corporation C with the promise to return a share of corporation C at a later time, plus some cash interest. A naked short is where instead B gives…
When A borrows a share, they sell it to D. Now as far as anyone knows, both A and D own a share but in fact only one exists. The extra sale from A to D also influences the stock price. What some consider bets are creating actual volume on the exchange, along with temporary dilution of shates.
Either way the stock price is influenced. In the first case, supply of the share is increased by the fact that A sells B's share, and in the second case, demand is decreased by the fact that instead of buying a share B buys a contract to have A deliver a share at a later time. Why is this a problem?
Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation
#55Counterfeit shares? Really? These are not really counterfeit shares, because they do not pay dividends or have any voting ability, the companies do not recognize them. More like "synthetic assets" that have the price pegged to the asset they mimic.
Do you want to buy my synthetic dollars with the price pegged to a dollar? edit: I just realized this is exactly what USDT is, but I still feel like it will all come burning down at some point. Maybe it will take 30 years though.
> Do you want to buy my synthetic dollars with the price pegged to a dollar?
This describes like half of finance. Treasuries, bank deposits and credit cards all represent to varying degrees “synthetic dollars.”
Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation
#56The author seems to be really upset about this, but I don't understand why. Nothing they are describing, if you ignore histrionic language like "counterfeiting", seems especially nefarious. Maybe I am misunderstanding. Basically, a short is when A borrows from B a share of corporation C with the promise to return a share of corporation C at a later time, plus some cash interest. A naked short is where instead B gives…
You are a company looking to raise money through the public markets.
You have issued 10 million shares; but the market is trading with 15 million because of counterfeit stocks.
The bankers and the hedge funds have got to dilute you; actively hurting your fundraising ability, and of course; your stock price (which you may own as a founder).
Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation
#57Counterfeit shares? Really? These are not really counterfeit shares, because they do not pay dividends or have any voting ability, the companies do not recognize them. More like "synthetic assets" that have the price pegged to the asset they mimic.
Do you want to buy my synthetic dollars with the price pegged to a dollar? edit: I just realized this is exactly what USDT is, but I still feel like it will all come burning down at some point. Maybe it will take 30 years though.
Yes, exactly!
There are also real world examples of currency pegs, for example the Hong Kong Dollar, which is pegged to the USD since the 70's.
Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation
#58Question: According to this, all the actual share certificates are held in a vault at DTC. Do people have a right to "cash out" and demand physical share certificates? If so, it seems like if a large number of people suddenly started demanding share certificates, this could cause problems for DTC and show this problem for what it is. Essentially a "run on the bank".
> it seems like if a large number of people suddenly started demanding share certificates, this could cause problems for DTC No it wouldn’t. You would be delivered shares within two days as is required. Lots of institutions don’t hold their shares “in street name,” i.e. they hold them in their own. And some people still demand physical certification. (Not every issuer supports this, largely due to exchange rules.)
If the number of share certificates being requested exceeds the number of share certificates existing, how would they do this?
Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation
#59Earlier quoted context omitted.
> Does your broker automatically loan out your shares? The “loopholes” are intentional carve outs for market makers [1]. Something you want unless you like market makers disconnecting every time the market hiccups. [1] https://www.law.cornell.edu/cfr/text/17/242.203
“Market makers” shouldn’t get to mess around with shares they don’t have. This whole idea of privileged traders, T+X settlement, etc is just crazy to someone who’s been used to trading crypto.
> This whole idea of privileged traders, T+X settlement, etc is just crazy to someone who’s been used to trading crypto
We have fast settlement for Treasuries. They’re T + 1 and heading towards real-time settlement.
For equities, however, there really aren’t many downsides to T + 2. At the same time, there are many advantages. On the balance, most people who have an idea about clearing are fine with T + 2, though it’s heading towards # T + 1.
As for market makers, we have similar evidence for market made markets being more stable in crisis than order book markets. Cryptos don’t need this. They have never marketed themselves as being stable, and don’t do anything that requires price stability.
Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation
#60I always thought that shorting was a disgusting practice, and wondered, “who buys a share, and lends it out so someone can manipulate it and lower its value, and profit from it”? It never occurred to me the majority of the “lending” did not actually happen.
Under normal circumstances, their sale has a negligible impact on price. They're betting the stock goes down, and you're betting the stock goes up, but there's no need to be hostile. And they give you a nice interest payment for the trouble.