"Excessive" (what does that mean?) naked shorting is not illegal so long as you have the cash to back the position and locate the stock. Can you point to a regulation that states otherwise? Note that I am not talking about manipulation but about genuine large scale "public knowledge" devaluations. I am not talking about going short without delivery of the borrowed stock. I'm talking about going short without anyone ever even knowing that it happened (from a stock loan perspective) because I covered same day. This is perfectly legal as long as I locate the stock-- and location information can be up to 24 hours old, and many people can use the same source. I advocate using real time information and mapping one share of located stock to no more than one short seller for location purposes. Obviously it is not important when or whether the loan is consummated through delivery...
"excessive" means more than the float of the stock or even more than what is available to be borrowed. if you aren't talking about single-party manipulation, then you can rest assured that every broker the bear crowd are using is not wildly outside of compliance rules and letting them short out of thin air. your presumption about covering the same day seems to ignore the fact that the bears would by 4pm have to buy back all of those shares they shorted, resulting in what seems to me to be a late day bull raid. for your reference, see EMLX 8/25/00. the laws are already in place to match things one for one, whether they be a certificate to a sale or an intraday round-turn to a sale. most importantly though, this has nothing to do with shorting on a downtick.
How does the "bear crowd broker" know whether the short is out of thin air ("vapor stock") other than by locating? What is the mechanism?? You must agree that location does not accomplish a determination of "excessive" for the sum total of short sellers at a given moment. A broker might easily take an order for the first 100 vapor shares while his location sheet shows 50,000 shares and/or the stock is "not hard to borrow". You are right that any shorting of vapor stock would price correct by the end of the day, but not without first providing some nice low prices for long sellers... Right?
This is what I was wondering about. Thank you for clarifying. So none of this has anything to do with bullets, nor is any of this really a legitimate complaing about intraday shorts.
Would you happen to work at or be a principal of a company that provides the technology or software that would be useful in locating stock, locking in a borrow, in real-time? Just curious.
No, but I admit to daydreaming about pitching such a thing to the "powers that be". Notice in the proposed short sale rule amendments: http://edgar.sec.gov/rules/proposed/34-48709.htm ``The SROs have adopted rules generally requiring that, prior to effecting short sales, members must "locate" stock available for borrowing.'' [However, there is no such SEC rule.] ``We believe it would be beneficial to establish a uniform standard specifying the procedures for all short sellers to locate securities for borrowing.'' ``Consistent with the current SRO requirements, the proposed rule would require that the locate be made and annotated in writing prior to effecting any short sale, <b>regardless of the fact that the seller's short position may be closed out by purchasing securities the same day.</b>'' [However...] ``[...] the short sale is executed (1) borrowed the security, or entered into an arrangement for the borrowing of the security, or (2) had reasonable grounds to believe that it could borrow the security so that it would be capable of delivering the securities on the date delivery is due.'' The technology is at a state today where (2) is not needed. Borrows can be locked in prior to short sale with no delay if an appropriate marketplace exists for it. Check this out: `` We believe a narrow exception for market makers and specialists engaged in bona fide market making activities is necessary because they may need to facilitate customer orders in a fast moving market without possible delays associated with complying with the proposed "locate" rule. Moreover, we believe that most specialists and market makers seek a net "flat" position in a security at the end of each day and often "offset" short sales with purchases such that they are not required to make delivery under the security settlement system.'' That is outrageous-- basically a condoning of what I am talking about on the sell side! I'm sure there is much more to be said about this proposal but I don't have the time to scour it right now. For one thing, it looks like the pilot program is not going to be for the most liquid stocks-- rather, half of the most liquid stocks (with the others as a "control group").
this thread is on bullets. i highly doubt that anyone here would take enough bullets to short the float of a stock. anyone who has the capital to do so won't be hurt by not having bullets anymore. or even having to trade again.
Sorry, but what the hell are bullets? and what happened to them? I don't have to worry about the sec ever getting to the minis right? if some how they do...i hope they leave the dax alone.