Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : CyBerCorp.com -- Ignore unavailable to you. Want to Upgrade?

To: CyBerCorp.com who wrote (253)	2/11/2000 9:02:00 PM
From: RobbRacer	Read Replies (1) \| Respond to of 1001

Cyber, I applaud the fact that you actually acknowledged that you as a BD have pulled shares in the name of risk management rather than just say shares were not available. I am sure this decision to be extremely conservative is the result of the merger and Berber and company will not do anything to jeopardize it. In fact, to be fair , if I was Berber I probably would also do the same to ensure my personal stake of 300+ million was safe until the transaction closed. With that being said as a customer I am extremely disappointed. My company uses your BD as one of its sources and it is clearly evident from recent history that everything worth shorting you pulled in the interest of risk management. I understand that shorting done by an under capitalized novice is an extremely risky move with the only reward being a bunch of $20 commissions. My true disappointment is for the professional trader using your system who suffers as a result of the risk management policy. My two constructive points of criticism are as follows. You have the technology to limit your losses anyway by closing out an account after their equity has been wiped out or additional equity to meet reg T requirements is not immediately wired in. By not giving the professional trader this option is in my opinion grossly unfair. It is obviously much easier to just not give those "risky" shares in the first place, but it is not the professional thing to do. My second constructive criticism is relating to honesty. I suggest that when traders ask why shares are not available and the reason is due to risk management you instruct your operators to state so openly. I know for a fact that this policy has not been followed and your operators have either lied on their own or were told by management to do so. Considering the power of the internet and the exchange of information with other traders at Penson and people who work in "the cage", it is easy to determine whether shares were truly available or not. Anything less than brutal honesty in my opinion is short sighted and unacceptable. With that being said, I accept the new policy even though I do not agree with it. I would hope that a better form of risk management would be employed such as my previous suggestions but as a trader myself I shoot for what is realistic rather than what I would hope for. Congrats on the merger and making Cyber mainstream, Rob

To: CyBerCorp.com who wrote (253)	2/14/2000 11:00:00 AM
From: just bearly	Read Replies (2) \| Respond to of 1001

Well I do appreciate the honesty in your reply. It confirms what I already believed. This is not to say that I am happy with the truth. It seems that there must be a way that Cyber can minimize their risk while still allowing customers the freedom to trade their accounts the way they choose to. I can appreciate Cyber's concern over traders who short volatile stocks without the discipline or experience to cover those positions when they move against them, but what about those traders who do have the discipline and experience to manage these positions? Originally Cyber was a trading platform for professional traders. Cyber required that any prospective customers have training and experience somewhere else before allowing them to open an account. Cyber has moved away from that to be a retail broker, which is understandable. What retail trader wouldn't want to be able to use Cyber's incredible trading platform? I have always been a huge fan and supporter of Cyber's platform, but I never thought that would come back to haunt me. Perhaps Cyber could allow an individual trader access to these short shares based on that particular trader's past performance, experience, account size, or other requirements that would make Cyber comfortable in giving that trader short shares. This would limit Cyber's risk, but would still allow those traders who regularly short stocks with success to continue to do so. I hope that perhaps Cyber would consider this solution. I know that I can go elsewhere to get short shares, but I am really very happy with Cyber's trading platform and would really like to stay with it. jb

To: CyBerCorp.com who wrote (253)	2/14/2000 1:28:00 PM
From: westchester_snowboarder	Read Replies (1) \| Respond to of 1001

Cybercorp response to short inquiries Cybercorp states: "It is a fair assumption that if we have curved short trading on a particular issue, it strictly deals with CyBerCorp.com's risk management for both the broker dealer as well as its customers. Because the potential loss on short an issue is unlimited, it is imperative that we take precautionary steps to avoid possible high-risk scenarios. As a result, when certain issues are particularly volatile, we may make a corporate decision to remove them from the shortlist. This is absolutely justified, in that 100% of the customer defaults that have been absorbed by the firm over time have been directly related to customer short activity in extremely high volatility stocks. We have an obligation to our customers, our shareholders, and ourselves to ensure that we act responsibly in this area, and we shall continue to do so." Well at least the truth has finally come out. As a few others have pointed out, until this point Cyber chose not to let their clients know that they were going to undertake a more stringent 'risk management' of short positions and the availability of shares. Of course, this might have an effect on some of their clients operations, but c'est la vie. Cybercorp very conveniently states the usual 'the risks of short selling are potentially unlimited'. They know, as does anybody with any market knowledge (which their clients are REQUIRED to have), that this is theoretically true, but practically false. No stock price has ever gone to infinity that I know of. So lets speak of practical, real world limits. This risk occurs becuase of a) takeover of the company, b) unexpected positive news of great consqeunce. Cyber states they are removing shares when stocks become very volatile, yet this is one of the prime trading opportuties for their clients. The fact that a stock is volatile does not automatically equate to more risk for Cybercorp or its clients. Quite the opposite. It is the stock that is not volatile, that has a large short position, that poses a great event risk to the broker and clients. I might add that Cyber nowhere states the even greater risk of allowing customers to take highly leveraged (margined) positions in these same "volatile" stocks. Remember, you can always be long AT LEAST as many shares as you can be short, and probably many many more. Which is riskier? Short 2000 QCOM (if you could get them) and having it go up 70 points? or Long 5000 QCOM and having it drop 70 points? Which is riskier- a stock that churns in a 40 point range? Or one that sits at $25 for a week and then suddenly moves to $50? What is hidden in Cyber's response is in fact that they are unable &/or unwilling to actively monitor their own risk in real time. Its also clear that Cyber is not verifying the quality of their clients. These combine to the result we see: the pulling of short shares in the name of 'responsible risk management'. Cyber would do itself much better to change their own margin/capitalization requirements to reduce their risk to rogue account defaults. And then let their clients know exactly what the rules are so everbody knows what they can and cannot do. Note that Futures brokers do not remove short contract availability from thier customers, even in times of extreme volatility. Yet they will automatically close out positions as margin maintenance limits are exceeded, and the exchanges and brokers will raise margin requirements as deemed necessary. So in summary, it seems to me that Cybercorp needs to apply some of their much tooted 'advanced risk management' available in Cybertrader to their own back office and stop making arbitrary and unpredictable changes in short share availability.