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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: LPS5 who wrote (9348)	7/2/2000 1:17:32 PM
From: Dan Duchardt	Read Replies (1) \| Respond to of 18137

LPS5, I'm inclined to take a somewhat different view of "legal" and "illegal". I think it's fair to say that any action taken in vilolation of the rules is correctly termed "illegal". In fact, the term "legal" is used several times in the Q & A from Nasdaq posted by OZ, and by implication that means anything done contrary to NASD rules is deemed to be "illegal". Perhaps it would be more correct to use the word "criminal" for the fraudulant, etc., activity you have alluded to. I understand and appreciate your discussion of the potential problem associated with a broker failing to obtain proof of the existance of a long postion in another broker's "box", but in my limited experience with this practice that does not seem to be the issue, and I don't see it as the primary issued of setting up offsetting longs and shorts in dual accounts. A few years back when I held offsetting positions, I never used the existence of my long postion to "justify" setting up the short. In most cases, I established the short on an uptick from the broker's pool of available shares for shorting, and later went long in a cross-guaranteed account. In this case the broker has done nothing wrong in allowing me to establish the short postition. The question of legality (if I may use that term) arises when and if I subsequently sell a long position on a downtick when I am net even or short across all accounts under my control. If I have accounts with broker A and broker B, and all broker A knows about is my long position, and all broker B knows about is my short postion against his inventory of shortable shares, then it seems to me broker A is absolved of any responsibility for me selling my long postion on a downtick. If that premise is acceptable, it moves the question to one of legality, or illegality of my personal action. As a non-member of NASD, am I as a private, non-affilliated investor bound by the rules imposed on NASD members with regard to netting acoss multiple accounts under control of a single individual? If so, then "getting caught" would require a comparison of my accounts by a third party or some mandate from NASD for the member firms to cooperate in flushing out "violators". I would think this would be a hefty burden on the individual brokers. None of this is intended to be a justification of personal violation of the rules, or using "getting caught" as a criteria for determining my actions, but I think it does raise a legitimate question about whether individuals who choose to maintain separate accounts with separtate brokers fall under the juristiction of NASD for managing those accounts. I don't think that question has been answered. Dan