As I understand the process, the transfer agent would contact your brokerage house [clearing house] and demand delivery of share certificates, which as a naked shorter you do not have. Your only recourse is to go on the open market and buy the shares your broker is requesting.
As I've posted in the past, but as there is so much interest on the issue today, bears repeating - First the call is made, and ignored, and there's little or no cross checking and even less enforcement as the SEC regulators play golf and look after their own careers and pocketbooks by going after large high profile cases nearly exclusively.
Eventually if there is a "squeeze" on, or if a golfing buddy gets the ear of the right party, the naked short WILL cover. I pointed out this activity months (maybe a year) ago on these threads. What you'll see is NOT 2,000 share trades, but say a 200,000 shares trade a/k/a a "buy-in" trade. This block is traded and shown to the party [clearing house] to indicate that the shares, while NOT going to be delivered, are being REPLACED BY A NEW (very late) PURCHASE of shares.
Where can a block of 200,000 shares (a buy) come from? From a bud a/k/a a sleaze-bag who will paint the tape with another 200,000 share trade (a sell).
Result: The clearing house golfing/drinking/illicit-sex/buddies are happy because they "got the missing shares." The shorter is still doing fine because he simply worked a deal with his bud to provide those shares to cover with. And now the shorter's bud is now naked short shares of the stock.
The clearing house may have to start all over again in T+3 plus the extensions.
One thing to keep in mind is that anyone naked shorting for a while, who has built up huge cash reserves and power is not to be trifled with. Powerful men got that way by knowing the right people and knowing what to do and when to do it.
It is a dangerous "game", and we must now await the end of the Company's quiet period to get out of this stranglehold, IMO.
Colin |
