shorting ETF's- have to mark "short"?

Discussion in 'ETFs' started by lescor, Mar 3, 2003.

  1. lescor


    Ok, I'm positive I know the answer to this question, but I would still like to hear other's comments and any similar stories.

    Echotrade is insisting that short sales of SPY have to be marked as 'short sales' and that shorts cannot be initiated with a straight sell. They also say that even if you bought a bullet and sold it, it's still wrong, since the exchange says that shorts have to be marked as such for tracking purposes.

    A good friend of mine was informed he'd be getting nailed with short sale violations for shorting SPY with sell orders today.

    Now am I missing something here, or is this just messed up? Any monkey knows that there is no uptick rule in the ETFs. I confirmed that it's not this way at Andover, and the "exchange rule" thing sounds kind of wierd too.
  2. if you are selling something you don't own long then you are shorting it, regardless of the uptick rule.
  3. jem


    That is silly. I have sold etf's short without marking them short since before there were qqqs. In fact when I owned the van buren office in San Diego (which sort of became echo) we sold etf's short without marking them short. That rule would be a new rule if it existed at all.
  4. lescor


    What I mean by marking a short sale as such is that you can only get filled on an uptick. A short sale in the specialists book will only get filled on an uptick. Some software will make sure you only get filled on an uptick. But if the market is dropping fast, good luck hoping for a good price on an uptick.

    With Echo's twisted logic, you are not allowed to hit the bid in an ETF unless it's moving up.
  5. lescor


    Intersting you mention Van Buren, since it's the wonder minds of that old firm that are running the show at Echo now. The original partners at Echo ran a good company, but these new guys seem to be doing everything possible to drive the real traders away.
  6. Just a note. ETF's are exempt from + tick rules and do not have to be marked short. ETF's such as SPY's can be created in any amount by depositing the stock basket(creation unit) at a depositary trust. Since ETF's are open ended( unlimited amount of shares can be created), they should be able to be held short.
    Exchange rules(AMEX & NYSE), do not require these securities to be marked short, as far as I know.

    Gene Weissman
    E-Brokerage, LLC
  7. I was speaking in general , not in regards to your particular order entry system. I'm sure you understand that shorting means selling something you don't own long.
  8. tdoc


    I thought you didn't have to worry about these things with a prop firm! Please tell me you don't. I am in the process of starting with a prop firm and my biggest reason for doing so is not having to account for each individual trade to the IRS! After 5 years of burning out accountants, I am more concerned about submitting a ten pound tax return, than commissions, access to bullets, and the PDT rule!

  9. jem


    mondo- In case you thought I was calling your remark silly- I was not, I thought it was silly because vito knew years ago we were selling qqqs and other etfs without marking them short. I assume vito is still with echo and that makes me suspect it is a software problem and not a misunderstanding of the etf rules. (unless there has been a very recent rule change)

    Lescor- We started the Van Buren office in 1997 but left a few years later when they were trying to bring all their offices under central control so to speak. I know why a few guys in San Diego left Echo because, recently, myself and a few other traders joined Mike Kessler and Jon Kirkland at andover/lynx in San Diego. However, I do not think I should comment on that situation since I do not know both sides of the situation (among other reasons) . I do know that Andover's very competive rates and apparently very good, solid software makes it very difficult to compete against them.
  10. anyone come up with a definative answer on this?

    I've never had a SS violation.but have received the e-mail's saying , "ETF's must be marked 'Sold Short'"......The strange thing is, before the echo/vb "merger" , I was trading them like a freak and never marked them SS , and never had any problems.

    What gives?
    #10     Mar 5, 2003