August 28, 2014
Deutsche Bank Fined $7.8 Million on Transaction Reporting
yup, they reported transactions as long/buys instead of shortselling. and they put them in equity swaps which means they didn't buy in within market deadlines. they have to buy in the equity swaps because of market deadlines. the regulator who fined is the british regulator. the very same thing is going on in the united states. and stocks are purchased all over the world, they are not limited to the british market.
this is how they did it:
sold stock short but reported it as long/buy. this inflates the float of the company.
put it into equity swaps, thereby getting around market deadlines to buy in. sold the equity swap to someone in order to "monetize" their debt and swap it for an equity holding.
the buyer is expecting shares of stock, carried it as an asset on their balance sheet. it was a debt/liability of the shortselling company, so it was really an IOU to the buyer of the swap.
shortselling is a debt to the buyer of the stock and a debt to the market. it is not an equity. the stock buyer did not intentionally buy an IOU from the seller.
there is a similar problem with the mortgage swaps. the buyer of the house owes the debt and the mortgage provider did not require credit history sufficient to protect the debt. then they put the mortgages into swaps, disconnecting the mortgage provider from the debt and "monetizing it" in order to pay salaries.