August 23, 2010
the shortselling game
while investors and shortsellers are not supposed to manipulate price on the stock market, the shortsellers are doing exactly that and the clearinghouse is complicit, finra knows about it but does nothing and the SEC does not enforce existing rules. shortsellers speak to each other in financial language. some may communicate but this is not really required.
they can make up imaginary shares/going naked without borrowing shares. this temporarily dilutes the market. they can put these shares up at huge blocks of stock, enough to drive the price downward. shortsellers hope to demoralize the investors, panic the investors into selling to them cheaply.
they can put several orders on at the ask and just start dropping the price as if they are eager to sell at ANY PRICE.
they can sell to the highest bidder and drop the price of the ask down to just above the bid.
they can just not cover the short sales because they can continually sell to themselves or other shorts at lower and lower prices. the person who sold to the bidder is a shortseller and the person who bought can short again.
look at the messageboards for these stocks. the shortsellers say the SAME THING about all of their shorted stocks, trying to influence investors to sell to them cheaply.
oh, yeah, they have to buy in sometime, but as long as they cover by continually selling to the investors, they don't have to worry about that 13 day rule. and if they go short without covering, their broker won't make them borrow the shares. the clearinghouse will continue to clear trades and keep bookkeeping entries.
if clients won't cover their short, brokers are supposed to buy in for them. and if brokers don't cover their short, the clearinghouse is supposed to buy in for them. but no one is doing that. it doesn't appear to matter if shares are available to borrow in order to short or not. maybe those shares are available to borrow for the retail shorting market only. maybe the pros don't bother to borrow shares.
i'm finding some very interesting stuff out about SBAY. the shortsellers who are trading this stock are not allowing their transactions to be publicly recorded. there is a significant short in this market. the people transacting business for this stock are not subscribed to a tape feed. what is very odd is that they are buying and selling to themselves at progressively lower prices with naked/imaginary shares and they are doing this in order to get SBAY investors to sell to them cheap.
it is fairly clear that this is market manipulation. this is happening at the clearinghouse and the clearinghouse is not stopping them from doing so nor informing the SEC of the situation. i spoke to NASDAQ last week and told them i was filing a complaint about this and that it's clear that the clearinghouse is complicit with this price manipulation. she was very quiet. but i don't think that she thinks anything will happen at all. after all, this has been happening for years and no one seems upset about it. yet the stock market affects many people through investments, jobs, the economy, our savings.
i believe in everything being visible in the light of day and i tend to find several avenues. i would suggest that if you are interested in the issue of shorting with imaginary shares (and thus temporarily diluting the market) that you contact NASDAQ, SEC, FINRA, the house banking and finance committee. i also intend to contact the company.
you should take peoples' licenses to be a broker, to sell stock, even to clear transactions. they are breaching their financial duty to the public. if you fine them, it only gives them cheap advertising.
naked shortselling should be illegal and several countries have moved against it. the shortseller who is creating imaginary shares to sell is not licensed by anyone to do so. they are diluting the stock market. there is no benefit to them driving prices down with this practice.
i would encourage all to comment on the fact that shortselling rules are not followed and it appears that there are rules for the retail investor and ways to get around rules for everyone else (marketmakers, shortsellers, people in the industry).
guess who loses on that one.
http://www.nasdaq.com/ click on contact us
http://www.finra.org/ click on about us and then contact finra
http://www.sec.gov/ click on contact
the SEC is requesting public comment here
the SEC is requesting public comment here
this topic would fit under many topics:
Governance and Conflict of Interest Controls for Clearing Agencies, Swap Execution
Facilities and Exchanges
d. furr made a great comment here
SEC Rulemakings under Title VIII:
Title VIII Provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act
great comment by William Wuepper on Short Sale Disclosure
Loan or Borrowing of Securities/Securities Lending Activities
you should read the comments and make one yourself. commenting on multiple items is allowed.
http://financialservices.house.gov/ contact us
Date Open High Low Close Volume
Tuesday, Jul 27, 2010 11.02 11.10 11.02 11.07 6,116
missing 6,116 shares
no transactions reported at any clearinghouse.
Wednesday, Jul 28, 2010 11.42 11.44 9.76 10.15 20,994
missing 13,401 shares
Thursday, Jul 29, 2010 9.945 10.20 9.87 9.87 22,184
missing 6,244 shares
Friday, Jul 30, 2010 9.58 10.23 9.00 10.13 29,828
missing 19,860 shares
Monday, Aug 2, 2010 10.00 10.15 9.92 9.9401 12,531
missing 4,433 shares
Tuesday, Aug 3, 2010 9.9315 10.00 9.05 9.36 30,887
missing 17,933 shares
Wednesday, Aug 4, 2010 9.23 9.64 9.13 9.4699 9,650
missing 5,900 shares