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Microcap & Penny Stocks : Naked Shorting-Hedge Fund & Market Maker manipulation?
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From: Hawkmoon6/8/2007 11:15:31 PM
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Help me understand something here about the mechanics of short-selling, if you would...

I've always been under the belief that the quantity of shortable stock was limited to the amount of margined stock in a particular issue. If a broker lends you money against your equity, they effectively have a lien on your margined shares and can loan them out for short-selling purposes. And since stock purchased on margin equates to a distortion of buying power, short-selling was created as a hedge to restore balance and equilibrium.

So I have to ask, one would be able to suspect that brokers have the ability to monitor how much stock has been purchased on margin, and thus, how much stock is availble to be loaned out for short-selling purposes.

Should Reg SHO be modified so that it requires some form of mechanism to indicate how much of a particular has been purchased on margin so that at all times the market has an opportunity to recognize where the "balance of power" lies so that the technicians can have an opportunity to determine where the optimal balance between supply and demand (regardless if artifically skewed by margin) should lie?

Abusive margin borrowing deserves to be countered by short-selling.. But short-selling beyond the availability of equal quantities of margined stock should be heavily regulated. Otherwise, what occurs is outright counterfeiting of shares. And I don't see any difference between counterfeiting stock and counterfeiting cash dollars.

What say you all?

Hawk
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