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Strategies & Market Trends : Bill Wexler's Profits of DOOM -- Ignore unavailable to you. Want to Upgrade?

To: Druss who wrote (2822)	9/17/1998 9:39:00 AM
From: mesaone	Read Replies (1) \| Respond to of 4634

Druss, that is the way I see naked shorting as well, and yes, it is illegal. I think that some of what the shorts did to BTIM over the last 8 months is illegal and I do hope that the SEC is looking into it. From one of my fellow longs, who follows the tape.. here is a quick scenario of the manipulation by certain shorts. while he is at it, he can perhaps get them (SEC) to look at the opening trades april 29th when btim opened with a bid of 8 1/2, down from a previous day's close of 11 1/4, as assensio's little puff piece hit. somebody either had been rounding up lots of shares to borrow, or went naked in a large way at the open.btw, btim got as high as 11 that day, before settling at 10 1/4, so whoever dumped those shares (some to me at 8 5/8, thank u very much) either lost that day, or had to cover later, and perhaps hasn't yet.

To: Druss who wrote (2822)	9/17/1998 12:36:00 PM
From: Daniel Chisholm	Respond to of 4634

Re: "naked shorting", I would like to understand the mechanics of how such a position would be established and maintained. By "naked shorting" I mean shorting stock without borrowing it. Even though [...the 'Net tells me that...] such a position would be illegal, I am nevertheless curious how it could happen (after all, the 'Net tells me that it does). Even though I am an honest person, I do like to understand how dishonest business is carried out. The 'Net also tells me that this happens all the time in Canada, where the securities laws are lax and lawless. In fact, it's not even illegal in Canada! (so the 'Net tells me...) Well, I happen to live in Canada, and hold accounts with Canadian brokerages, and I have not yet been able to avail myself of such a convenient service. In fact, I have been trying to borrow shares of Panda Project since it was over $5, without success. I have heard that [NASDAQ] market makers and (listed exchange) specialists are permitted to short as part of their job functions, and this shorting does not have regular rules apply (specifically, they do not have to heed "tick" rules, and they do not have to borrow stock). I have also heard that this might entail them being net short at day's end, even if they might normally wish to close out each day flat in the regular course of their business. Presumably, such legal, special shorting is accompanied by various monitoring, and rules. A specialist or market maker is certainly one of the market's more visible participants, and I would think more subject to regular regulatory overview and supervision. What about allegedly crooked OTC-BB market makers? Could one of these be net short a particular stock, for extended periods of time (in order to be involved in the market as a speculator, in addition to a marketmaker role)? Eventually all trades must be settled. Usually this happens three days after the trade date, however I gather from my broker that there also exist procedures for exceptions to the normal delivery process. Other than T+3, things also (may) happen at T+5 (sort of like an extension to the normal process, if I understand correctly), and T+10 (it sounded to me like "this is an absolute deadline"). Whatever the normal and exceptional settlement procedures are, surely the trade must eventually be settled, which involves delivering stock to the buyer? I understand that it is possible to short without borrowing shares during a day trade, and that this is entirely legal, provided that the sale is properly declared as a short sale, and that the position is covered the same day. It was suggested to me that this is done in large, liquid stocks such as Amazon.com which are virtually impossible to borrow, yet are nevertheless attractive to daytrading short sellers. However, the 'Net rumors of large, crooked players holding large, undeclared "naked" short positions for extended periods of time, fascinating as it sounds, seem less and less plausible to me as I attempt to discover more about the process of legal and illegal shorting. Can anyone help me come to a conclusion? I'd like to know whether or not naked shorting is yet another Internet Urban Legend. - Daniel