I'm probably not the right person to ask. LOL I'm currently in more than heated debate with several people who I believe are professional shorts or hedge fund associates.
There is a ton of stuff now on all the message boards about naked shorting and debates as to whether or not it exists, and if it does, what the extent of the problems is, and if it is a problem, should it be permitted?
I'll try to simplify although I have pages and pages of links if you are ever interested. I started a thread where some of the stuff is listed.
As a general rule, under the SEC acts and regulations, naked shorting, shorting without borrowed shares is not permitted. There are exceptions such as MM, supposedly to assist in making a liquid fair market. Many contend that MM's abuse this exception and really just line their pockets.
Hedge funds, it is argued, have become experts in using arbitrage, desking transactions and overseas accounts to circumvent the requirements of borrowed shares. As hedge funds are now estimated to control over half of the equity transactions, their ability to work "in secret" has enabled them to do things that were never contemplated when the securities acts were promulgated in the 30's.
How do naked short transactions get covered?
As by definition, there is no borrowing of shares, the cover is only required if your account gets in trouble. There is much talk about never having to cover because a company's shares are shorted to 0 or the company liquidates in some form. So the incentive to short more and more can become a self-fulfilling matter. Some argue that there are paid bashers, organized transactions to create volume and keep pressure on a stock. The other side will say it can't be proven. Nobody admits to being a paid basher or a manipulator.
As for factual background, there is more opinion floating around on both sides than facts. The incentive for hedge funds is to keep this stuff quiet and we are now seeing many get very upset when this issue is debated.
With respect to your question about the Reg SHO list, there is also much discussion and differences of opinions. One side says that the SEC and the electronic clearing house is ignoring the problem. There are loopholes and ways around. Supposedly, a stock should not be on the list continually. Writers have commented that vague language and "grandfathering" of a large number of previous naked shorts have pretty much made the regulation useless.
All my opinion..... |
