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Strategies & Market Trends : The Best Day Trader Training
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To: Cash who wrote (221)7/24/1999 7:46:00 PM
From: John Fairbanks  Read Replies (1) of 230
 
The way it happens is that the only controls which exist are to prevent
you from hitting the bid on a downtick. So instead of selling the
stock to the market maker on the bid, what you do instead is offer
the stock out and hope that someone will come along and buy it from
you -- which basically sets up a short position the same way that an
MM can go short at any time. Since Instinet has such awesome liquidity
they are able to get your offer filled almost as quickly as if you
had hit the bid. You can also do this by offering out on Island, but
you have less chance of getting filled... and actually even in the
instinet case the way that you manage to get it off is to offer to
sell the stock at say 1/4 below the current market.

Now as to the legality, I heard a couple of explainations... one guy
said what I basically told you above, which is that shorting is illegal
only if you hit the bid. What another guy said (and I think this is
probably closer to the truth) is that the only place there are checks
in the system is if you hit the bid and that NASDAQ was working to
close the door on this. Still another guy said that it was just a
bookkeeping thing, and that by offering out the stock you actually
created your own temporary uptick.

Sorry I can't offer more than that... I just know it works. But for
that matter, if you watch for a flicker of an uptick you can almost always grab
stock on Island the split second it upticks... if you try and get
stock through SOES it will have downticked again long before you get
filled, but because Island is pretty much instantaneous you can
nearly always pull it off.
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