Overstock was in a very interesting situation by itself. And Byrne, IIRC, insisted that his stock was being systematically brought down by these FTDers. But there was another POV that the management was too sucky. Lets stay away from Overstock.
Re naked short selling causing counterfeiting of stock. I don't know what counterfeiting is used to mean in this context, but obviously any counterfeit issue will cause the issuer's liability to increase beyond what is legit (e.g., in a dividend dist, or in an M&A.) We don't see any such evidence here. It sounds like spin to me.
Failure to deliver is a fairly routine thing. Ditto for failure to receive. And the dtcc guy is putting the two collectively at 1.5% by dollar volume. IMHO failure is generally at the larger end of the size spectrum - after all, my broker doesn't let me sell any stock unless I already got it in the account, or buy any unless I got the money. Therefore, I don't find a disparity in %ages necessarily unusual. It's an integral aspect of how our financial system works. Save for some emergeing markets, most countries have a legal framework for borrow (e.g., by your broker temporarily lending your stock doesn't mean you lose your voting rights); and it is fairly routine and automated.
Market Makers serve a number of useful functions, one of which is to maintain a firm quote for you and I. On an order-driven market such as the NYSE, if you wanted to buy 100 AMD and nobody wanted to sell at that instant, well, you just wait until a seller materialized or the Specialist decided to step in. In contrast, under a quote-driven system such as the NASDAQ, there is an MM ready to supply INTC. All stocks do not have the same level of MM support - liquid/big ones have more MMs. There were some failures in the plan during the 1987 crash but the system is pretty airtight now. Anyhow, if you must have that level of liquidity for small investor, you got to allow the so-called "naked shorting". What's wrong with it?
regards
-d |
