An American can open up an account with Canadian stock broker, and trade whatever stocks they like, including US stocks. Some Canadian brokers will allow you to sell short American OTC BB stocks, and to do naked short selling of any American stock. (Naked short selling is done without borrowing the stock, and I understand that U.S. brokers won't do it.)
Over the past couple of years, I have been given the names of a couple of Canadian brokers. They ranged from medium to tiny in size, by American standards. I talked to the brokers, but I never opened an account.
I can tell you what the brokers told me. All three could sell short American OTC BB stocks. They were all willing to open an account in US dollars.
The tiniest broker told me that he required that a client give him a non-US mailing address. No suggestions were made as to how one would do this, if you lived in the US.
The largest broker would accept a customer with a US mailing address, although not in every state. My state was not among the states he would do it, so he said I should give him an address in another state. This broker also required a $75 k initial account size, and had a negotiable commission of typically $90.
The third broker didn't care where in the US my mailing address was, and his commission was typically $95 for a trade of less than $5000. He told me that 75% of his business comes from 'US customers doing various things with bulletin board stocks.'
The latter two brokers both paid interest on the proceeds of the short sale. I was assured that the account value is insured. The amount of margin collateral required was typically the proceeds of the short sale plus 50%.
There is an air of secrecy about these brokers that I don't understand. The individuals who gave me the brokers' names did so privately. They asked that I not post them in a public place (so I won't). I've never seen brokers of this type identified by name in public. The websites for the brokers I contacted looked like any other website for a broker, and they did not mention anything about shortselling, which seemed odd to me if shortselling BB stocks is in fact a big part of their trade. So I'm not sure whether the brokers are breaking any laws, or whether their customers are, or just what.
As I said, I have never opened an account with any of these brokers. |
