(02-05-2014, 11:47 PM)admin Wrote:
(02-05-2014, 10:41 PM)Nak for it Wrote:There is much more than that report suggests. As long as DTC is owned by Prime Brokers there will be direct naked shorting without hedges. Why do Goldman ands others get fined every other year for facilitating the trades? Because it is hugely profitable to the hedgies and the Prime broker. just pay the paltry SEC fine and do it again.How many of you are recieving 20%? NONE!
Yes, I was wondering about that. The article described some of the mechanics of naked shorting (which was the reason for me to post it here) but these mechanics don't involve a net short position so I thought, either this isn't all (that is, all the different ways a naked short position can be opened), or naked shorting isn't the bogey some think it is.
Since I don't have the answer myself I posted it here to provoke some discussion
As I have posted several times here in the past, I never believed the problem was one of "naked shorting" and that it was more a problem of "circular" trading, having multiple accounts, some long, some short, within which fully hedged positions could be traded to manipulate the price up or down. Long accounts with net long positions could even loan shares out to partners to drive the price one way or the other or to non-artners for the interest revenue.
Of course, this can can and does create tremendous opportunities in options, if one knows in advance of how the ball will bounce.
We are still seeing price manipulation and much of that is related to the options. Tis not a fair playing field so be careful. I expect it to continue as long as long as there are so many unknowns but I believe we are at the bottom of the trading range provided there is no additional negative news before the minority interests are dealt with and deal is signed.
But then, this is just my personal opinion.
The original post of this thread by Admin was a pretty thorough explanation of naked shorting and how some of the strategies work in practice. Thanks, Admin.