Only those who may borrow financial stocks may short sell (shorting monopoly)?

Discussion in 'Trading' started by crgarcia, Jul 16, 2008.

  1. Top brokerages, like Citi, Goldman, have many clients long on financial stocks , so they can easily borrow.

    So, now we have a shorting monopoly?
  2. piezoe


    The problem is the same share being borrowed many times over at the same time so that it is possible to have more shares short than the total number of shares issued. That's naked shorting and it's a big problem for small companies that get raided by naked short sellers to intentionally drive their stock down to ridiculous levels. There is nothing wrong with short selling so long as each share sold short is linked to a share held long somewhere. But when you have two shares sold short linked to the same share held long that's naked shorting.

    Suppose I loan you a dollar which I never deliver to you, but on the basis of the loan you go out and make a purchase using money you already have but anticipating that the dollar i loaned you will be delivered. In the meantime I loan the same dollar to someone else and I don't deliver that one either. Now two people have a little problem, they have borrowed the same dollar at the same time and neither one has gotten their dollar yet.

    It's ironic that the SEC is now worried about this problem, that they have ignored for years, now that it is affecting their buddies that likely have been some of the worst offenders. What about all those small companies that have been ruined by naked short sellers over the years. It's not the big guys that are vulnerable, they deserve what they got, its the little guys that need protection. Under Cox the SEC has been shall we say, as Dick Buttons once said of the Olympic skater who had fallen on her tush 3 times, "less than good".
  3. piezoe


    The SEC's web site is SEC.GOV . I suggest that we innundate them regarding the need to halt naked shorting period. Not just for their Wall Street buddies firms. They have a complaint submission mechanism. I suggest that all ETers that are as pissed about naked shorting as I am, send them a message. Now is the time to get some action.

    P.S. this has nothing whatsoever to do with legitimate short selling that is an essential part of the market. And if Cox and those other Bozo's even hint about suspending legitimate short selling we all should scream bloody murder.