gig: Is there really that much of an edge in being able to short a small number of unborrowable stocks out of the whole universe of trading opportunities that you would risk having the profits taken back, large fines, or worse, and have to worry about those possibilities for years after the trade? I thought about commenting on your posting in another thread that nobody would be stupid enough to mention that they can do this intraday shorting without a locate, but I guess I was wrong. Shouldn't take too long to figure out which software and firm he was talking about. Probably not too long for a competitor to rat them out, either. GATrader: If it's a hard-to-borrow stock that's on the exchanges' lists, it's not enough that the clearing firm has long positions in the stock. SHO requires that every individual short sale be located and documented (i.e. they'd have to have some mechanism in place for the broker to do this).
I agree with you wholeheartedly alanm about why anyone might want to trade under those circumstances. Even if there was an edge and "sure" money. It is illegal and regardless who would be at fault years down the line, the money you might make will pale to the money you'd probably shell out in fines and legal fees. In addition those legal docs traders sign are so one-sided in favor of the firm that when it goes to arbitration, trader will most likely lose. Regarding Reg SHO/locates- the point of locates is moot in certain tickers since some B/D's out there actually OWN stock and will let their own traders use it (for a fee) . There would be no downtick and locate issues.
Quote from GATrader: Regarding Reg SHO/locates- the point of locates is moot in certain tickers since some B/D's out there actually OWN stock and will let their own traders use it (for a fee) . There would be no downtick and locate issues. I'll go back and read it, but I don't believe that's true, at least not for retail traders. Even if the locate is from a BD's own inventory, it would have to be documented for each individual sale (i.e. for every single time you traded it that day), which I doubt is being done by anyone. I'm not familiar with what happens for prop sub-accounts and position netting (i.e. whether if the firm's prop account as a whole is net long, you can mark your order as a sale instead of short-sale). Can someone verify?
It really depends on the firm, it's compliance officer's and the situation! Do trader's make naked short's still? The answer is yes. Will somebody pay up when they pull the entire paper trail in the next three years, YES! Is it worth it, it depends, BWAHHHHHHHHHHH! Posting on Elite Trader, PRICELESS.
alanm is right. forget the legal problems but unborroablestocks have huge short positions andd huge sqeezes so why screw with it
Ran a simulation from 1/1/2005-now of a short trading system i have. Checked all the symbols traded by my system against 4 short lists: RML, Genesis, IB, SLK (Goldman). RML, Genesis, IB lists were obtained from their websites. SLK list was sent to me by a colleague. Note that if one symbol was traded multiple times by the system, it appears multiple times in the list of symbols to be checked. All stocks traded had volume > 50000 for 2 days in a row and closed above $5 the day before being traded. Here is what i found: RML Found 5947 of 11569 symbols (51%) GNDT Found 7168 of 11569 symbols (61%) IB Found 8632 of 11569 symbols (74%) SLK Found 8695 of 11569 symbols (75%) This was my feeble attempt to measure how these firms' short lists measured up against each other. I dont think its conclusive but to me it provides a rough guideline. Also note that firms' short lists change constantly as they form new relationships so these results can only be considered valid for a short period of time. All comments and constructive criticism welcome. Also, i invite you to send me your firm's short list, and i'll be glad to run the same test and see how it compares to the above.
11000 different stock in a little over a year? Wow. Keep in mind that the lists change every day (and sometimes intraday). If you don't have the list for each day, the results may not be accurate, particularly considering you are probably shorting stocks that are "in play".
Let me put it this way there are ways to SHORT LEGAL mostly every stock I'm NOT willing to share how only saying if you do your homework you can if even for a premieum.