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Microcap & Penny Stocks : BASHERS POST THEM HERE!!!!! -- Ignore unavailable to you. Want to Upgrade?

To: Hadji who wrote (126)	6/30/1998 1:31:00 PM
From: Larry Voyles	Respond to of 390

Sure it happens. Naked shorting is common. As to where the naked shorters cover from, it really doesn't matter. They could buy it on the open market or from not-so-nice MMs, as long as they have some cooperation. For those lurkers that aren't clear on why naked shorting is bad, here is an over-simplified explanation: It's bad because it (falsely) increases the liquidity of a stock, just like the company putting more shares on the market. It causes the value of the individual share to go down, which causes the price to drop. Imagine this hypothetical scenario: FBNA has 1 million shares of stock in the float. I decide I want to short FBNA. I sell 500,000 shares that I don't own and don't borrow (naked short). This causes the float to temporarily increase to 1.5 million, devaluing the shares and increasing their availability. Since there are more shares for sale out there, the price goes down. I can then slowly cover at an advantageous price. Everything that one can imagine (and then some) happens in the financial markets. If there's money involved, you can be sure that the criminals will follow. The US financial markets are the most well-regulated markets in the world, but only a small percentage of the criminal activity is being discovered, IMHO. Somebody posted an excellent article about chop stocks somewhere (was it this very thread?) that goes into excellent detail about the nasty things that happen in the markets.