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Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

counterfeitingstock.com

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Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

#161

Post by Daho0n »

ghayes wrote: post #92
dannyw wrote: post #76

Earlier quoted context omitted.

Does it matter? 1 stock = 1 stock. 1 stock should never be 2 stocks. It’s because I believe in ownership of what you make. If you founded a company, sold 10% on public markets for float, and magically 20% of your cap table now exists on the NYSE; something is horrifically wrong. And yes, you would have suffered negative financial outcomes because of the counterfeiting.

There’s not just “1 stock.” Let’s say: A loans a share to be B who sells to C who loans to D and so on. You end up with a multiplier on nominal stock, always, and that’s perfectly normal. I really don’t understand the moralistic argument here, esp. without regard to the underlying value of the original asset. Up is not strictly good.

No matter how many times it gets repeated in the thread it is still nonsense made up by the stock market. Exchange "Share" with "Burger" and see how many Burgers you can create from thin air. If you end up with more than one you should start a McDonald's competitor!

If you can't it is because you are making mental gymnastics as soon as the word is some magical word Wall Street made up. Sure it is correct that you can but it shouldn't be and can't be fixed fast enough.

But thank you to everyone who gave me GME money with their mental gymnastics <3

Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

#162

Post by eru »

theaeolist wrote: post #105
starfallg wrote: post #97

Earlier quoted context omitted.

I don't know if you are aware of this, but you are basically arguing against the idea of fungibility in finance. It's one of those fundamental concepts that banking is built on. It's one thing to argue for making sure shorts are well-regulated, but this something entirely different that has the risk of fundamentally breaking our society.

Cash is fungible, but it's unclear whether stocks should be fungible in the same way.

Companies are allowed to issue non-fungible shares.

Eg it's common in some tech companies to give the founders super-voting stock that reverts to normal stock on sale.

Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

#163

Post by hagy »

darawk wrote: post #139

This is mostly nonsense. There is nothing wrong with there being more shares short than shares outstanding. It just seems problematic, until you think it through. Person A has 1 share of company Y. Person B borrows 1 share of company Y from person A, and then sells it into the market. This is called a short sale. But person B just sold their borrowed share. Now that share is owned by person C. Person C can now lend i…

When person A lends their share to person B, they no longer own a share, they own the right to receive a share from person B sometime in the future, interest payments on the lending, and collateral to ensure the borrower can make good on their obligations.

This website seems to mainly be talking about naked short selling, which is selling a stock without first owning or borrowing it. This not necessarily illegal, although can be under some conditions, including aggressive short selling. Wikipedia has a fair amount of info on the practice, https://en.wikipedia.org/wiki/Naked_short_selling

The practice of a selling a share that one does not own is supposed to be used by market neutral market makers to ensure their is always liquidity. They must then at some point in the future buy a share from the market to replace the phantom (i.e., counterfeit) share that they sold.

This practice is useful when there are suddenly more buyers than sellers and the market maker exhausts their standard supply of shares. Otherwise there may not be any bids on the stock at any price for sometime. Other argue that this is no longer necessary with many participants beyond market makers that also employ algo trading and can quickly adjust to increasing demand. Further, if lack of supply becomes a regular occurrence, investors may start regularly setting high, possibly even ridiculously high, standing sell limit orders such that there will always be bids at some price points.

Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

#164

Post by eru »

jannes wrote: post #115
dexen wrote: post #98

Earlier quoted context omitted.

Your explanation makes a lot of sense. Nonetheless it's bit of a hard sell as it seems to parallel fractional reserve banking to a degree, and we've come to accept the later as the best currently available compromise.

I think the dilution from fractional reserve banking is priced into the buying power of each dollar somehow. You never look at the value of a dollar as the % of total dollars in circulation. The value of a dollar is rather defined by how many goods/services/other currencies you can get in exchange for it. With stock it matters a lot more how many % of a company is represented by a single share.

Each loan is also a deposit. Each debit is also a credit.

Similar, each short seller not only adds a _virtual_ share to the market, but also has an obligation to later on buy a share back.

Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

#165

Post by konschubert »

sumedh wrote: post #77
konschubert wrote: post #75

Earlier quoted context omitted.

Why would Tesla not exist? A low stock price doesn't bankrupt a company.

It can because if you want to raise money, the banks wont accept your shares as collateral making your job to raise money very difficult.

Only if you need to raise money in order to survive. Which most companies don't.

Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

#166

Post by lop »

I wonder if there is public accessibly list (or registry if this is more correct term for it) where everybody can check the involved parties of short selling (of Gamestop). There is https://fintel.io/ss/us/gme or https://www.marketbeat.com/short-interest/ - but a I mean a more (and free) total overview for stocks traded on NYSE for example. So far I was not able an URL for it.

For all EU-countries there is an official list here: https://www.esma.europa.eu/sites/default/files/library/ssr_w... (and most of the links work ;- )

Is there something similar for NYSE?

Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

#167

Post by eru »

myownpetard wrote: post #88
woopwoop wrote: post #70

Earlier quoted context omitted.

This doesn't distinguish between shorting and naked shorting. But in either case I don't understand why I'm supposed to be upset. Is it because the stock price goes down?

With normal shorting the number of shares being traded is no greater than the float. Only with naked shorting can there be more shares traded than float, as in the parent's example. Interestingly, in both cases the short interest can be greater than 100%. My understanding is that naked shorting can be used to artificially lower the stock price by increasing the supply with the ultimate goal of driving the company int…

> With normal shorting the number of shares being traded is no greater than the float. Only with naked shorting can there be more shares traded than float, as in the parent's example. Interestingly, in both cases the short interest can be greater than 100%.

Why?

A owns a share, loans it to short seller B. B sells the loaned share back to A. Then A loans the share again to B, B sells it back to A. Now repeat the process a million times.

You can get arbitrarily high amounts of shorting without any naked shorts. (And usually, A and B don't know each other. It's all done via exchanges and clearing houses etc.)

Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

#168

Post by School-Cotton »

myownpetard wrote: post #88
woopwoop wrote: post #70

Earlier quoted context omitted.

This doesn't distinguish between shorting and naked shorting. But in either case I don't understand why I'm supposed to be upset. Is it because the stock price goes down?

With normal shorting the number of shares being traded is no greater than the float. Only with naked shorting can there be more shares traded than float, as in the parent's example. Interestingly, in both cases the short interest can be greater than 100%. My understanding is that naked shorting can be used to artificially lower the stock price by increasing the supply with the ultimate goal of driving the company int…

> Only with naked shorting can there be more shares traded than float

Why? Imagine there exists one share of GME, owned by Alice. Bob borrows it from Alice and sells it to Charlie. Now both Alice and Charlie own one share, and no naked short sale ever happened, as far as I understand that term.

Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

#169

Post by eru »

ZephyrBlu wrote: post #146
threedots wrote: post #128

Earlier quoted context omitted.

Friction is the difference. Naked shorting removes the need to locate borrow. That need acts to prevent runaway supply expansion. Naked short selling also circumvents the rights of share owners as a class to decide whether to allow synthetic share creation.

Fair enough. I assumed that locating shares to borrow would be relatively easy.

Typically it is, but for heavily shorted stock, the fees go up.

Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

#170

Post by RivieraKid »

Can't believe this nonsense is upvoted on HN.

Short-selling helps to correct market prices of capital, which is good. It even directly helps the average retail investor because when you buy an index, you want the prices to be as close as possible to the "actual value".

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