Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

counterfeitingstock.com

Post reply on HN
Print view View original

201–210 of 403 posts

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

#201

Post by varispeed »

hagy wrote: post #163
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, alt…

Isn't selling something you don't own a fraud or the stock market has an exemption? The instance when A essentially sells the share to B accepting the right to receive the share back as a payment also wouldn't fly in any other environment, as this could just open the door to money laundering. So why is this accepted in the stock market? Or simply the law enforcement doesn't know how to tackle it?

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

#202

Post by twic »

ta70 wrote: post #111
Lazare wrote: post #94

Very, very much a crank site. One pinch fact, two cups of confusion, and generous splash of seething rage. It's interesting in much the way the Timecube site is interesting...and is informative about financial markets in much the same way the Timecube site is as well.

Non American asking: What does crank mean here?

You've had some good answers, but i will add that the internet led to a Cambrian explosion of cranks, because now anyone can put up a webpage. There is a catalogue, although i don't think it's maintained any more:

http://www.crank.net/contents.html

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

#203

Post by twic »

threedots wrote: post #160
JumpCrisscross wrote: post #120

Earlier quoted context omitted.

This entire topic has been poorly addressed. I don’t think I’ve had stronger Gell Mann vibes on HN than I’m having with this story.

Seconded. The last week has been actually quite unsettling and completely changed my perception of HN.

It absolutely didn't change my perception of HN, it confirmed it! But i'm overjoyed to see other people becoming more skeptical.

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

#204

Post by optimiz3 »

freeone3000 wrote: post #83
egwor wrote: post #79

Earlier quoted context omitted.

If I want insurance to protect against the price going down, I'd buy a put option. I know a bit about this but I'm not an expert on this. Naively, those put options are effectively offered by those providing a short (they think the price is going to go down, or have a way to hedge the price decrease). Those don't get represented as shorts either. https://corporatefinanceinstitute.com/resources/knowledge/tr... The oth…

Options are bets in a way that actual sales aren't. Notably, a put explicitly a contract to sell something at a given price in the future. Nobody buying or selling a put has any intention of stock trading hands -- and the option can even be written as cash-only, where stock never actually does. So while selling a put is the same fundamental idea as a short ("I think the price will go down"), it's mechanically very di…

> selling a put is the same fundamental idea as a short

Selling cash secured puts is risk equivalent to covered calls, but doesn't require stock. If anything it's a neutral/bullish strategy since max profit is above the strike.

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

#205

Post by codyb »

Daho0n wrote: post #161
ghayes wrote: post #92

Earlier quoted context omitted.

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…

Person A has burger. Person B borrows A’s burger and sells it to Person C.

Person D borrows Person C’s burger and sells it to Person E.

Still seems to work? Then, tomorrow Person B and Person D owe burgers to Person A and Person C.

If there is only one burger in existence, this will create demand pulling prices up I’d think.

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

#206

Post by twic »

brutusborn wrote: post #2

I couldn't find any details of authorship or contact details of the "Citizens for Securities Reform". Is this pseudonymous to prevent reprisals? Does anyone have any further info?

Also posted under the name Gerald Klein:

https://seekingalpha.com/instablog/11442671-gerald-klein/309...

Although it's not clear to me if Gerald Klein is the author, or is reposting a document someone else wrote.

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

#207

Post by twic »

Time to read the SEC SHO FAQ [1] again:

> Question 7.1: Do naked short sale transactions create "counterfeit shares?"

> Answer: Some believe that naked short sale transactions cause the number of shares trading to exceed the number of shares outstanding, which in turn allows broker-dealers to trade shares that don't exist. Others believe that the U.S. clearance and settlement system, and specifically the NSCC’s CNS, produces "phantom" or "counterfeit" securities by accounting for fails to deliver.

> Naked short selling has no effect on an issuer's total shares outstanding. There is significant confusion relating to the fact that the aggregate number of positions reflected in customer accounts at broker-dealers may in fact be greater than the number of securities issued and outstanding. This is due in part to the fact that securities intermediaries, such as broker-dealers and banks, credit customer accounts prior to delivery of the securities. For most securities trading in the U.S. market, delivery subsequently occurs as expected. However, fails to deliver can occur for a variety of legitimate reasons, and flexibility is necessary in order to ensure an orderly market and to facilitate liquidity. Regulation SHO is intended to address the limited situations where fails are a potential problem.

> Similarly, CNS has no effect on an issuer's total shares outstanding. With regards to the contention that the U.S. clearance and settlement system, and specifically NSCC's CNS system, creates counterfeit shares, this is not the case. CNS is essentially an accounting system that indicates delivery and receive obligations among its members (i.e., broker-dealers and banks). These obligations do not reflect ownership positions until such time as delivery of shares are actually made. Ownership positions are reflected on the records of The Depository Trust Company ("DTC").

[1] https://www.sec.gov/divisions/marketreg/mrfaqregsho1204.htm

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

#208

Post by c1b »

eru wrote: post #167
myownpetard wrote: post #88

Earlier quoted context omitted.

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 proce…

I somewhat follow, but it seems shares have privileges that cannot be synthesized in the same way that dividends and value can. For example, if the firm votes for a new CEO, these shares should have voting power, but B cannot fulfill this obligation to A, so how can these shares be resold to multiple buyers?

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

#209

Post by marketneutral »

RivieraKid wrote: post #170

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".

the article does not argue against short selling. it argues that there are loopholes being used to facilitate naked shorting and that the lack of transparency with naked shorts is problematic.

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

#210

Post by goodluckchuck »

varispeed wrote: post #198
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…

This is the problem - someone is selling something they don't own. It's like you borrowed a car from a rental company and then you sold it to someone. Pretty sure that's a crime. If this is allowed on the stock market, then I think this is laziness of law enforcement that they don't know what to do with it. What if the owner wants the item back and the person you sold it to won't sell it? It seems like this may be th…

Yep, just like fractional reserve banking, it demonstrates for a lot of people that there can be a “run” on a stock / brokerage / the entire market.

Well, the FDIC insures up to 250k of bank accounts, but what happens when there’s a run on your 401k?

Post reply on HN