It`s a global problem, but it poses the biggest threat to Canadian capital markets, where naked short selling – the process of selling shares you don`t own, creating fake or «ghost» shares – survives and remains under the regulatory radar, as broker-dealers don`t have to report failed trades until they exceed 10 days. Edit 3: My r/stock post was deleted because I lobbied for a donation to the author. Like wtf, they literally don`t have such a thought. Can someone message the moderator team, I haven`t had any free time since I`m at work now, and I haven`t done a all day. Here`s the link to the article: www.reddit.com/r/stocks/comments/m9d549/naked_short_selling_the_truth_is_much_worse_than/?utm_medium=android_app&utm_source=share I think most people misunderstand the short circuit and the role it plays in a portfolio. On the contrary, it has been repeatedly demonstrated that stock selection in a long-only portfolio lags behind the index. So if anything, chances are you`ll shorten individual names instead of throwing individual names. Am I missing something? What are the credible economic arguments for banning short selling? And banks in Canada in particular essentially write the rules themselves, which now makes it easier (and more legal) to lend cash account shares. McMillan also noted that «the number of short campaigns in Canada compared to the United States, the European Union and Australia is completely disproportionate to the size of our capital markets.» Something I`ve always wondered: Are there any rules/regulations about how much time you have before you`re forced to cover your shorts? This layer of what many now call a «criminal organization» is the most difficult for regulators to manage, regardless of the illegal nature of these activities. When you short a stock, you have to «buy» it to get out of your position, and that`s the kind of «buy» you missed. «These traders break various regulations and take that risk because of the size of the account,» he said.
«You have a responsibility to reject these trades. Anyone who does this is breaking the rules [for the short seller] and they know they won`t be able to reach a settlement. As custodians, it is their regulatory responsibility to reject these transactions. Instead, they are deliberately and knowingly breaking the law. My understanding is that short selling provides a valuable incentive for short investors to identify and publish unflattering information about companies, while almost everyone else involved has an incentive to withhold that information. This should improve the efficiency of capital allocation in the financial system. You buy a stock from your broker who owns it for you. Your broker is like a «safe,» which means they`re supposed to protect your interests. You are legally required to do so.
The main arguments I`ve seen against short selling are that it hurts businesses, «destroys value» or is irresponsibly risky. I was not convinced by any of the arguments I read. In Canada alone, hundreds of billions of dollars have been vaporized from pension funds and ordinary, normal Canadians, according to Texas-based attorney James W. Christian. Christian and his law firm, Christian Smith & Jewell LLP, are serious in stock market manipulation litigation and have prosecuted more than 20 cases of naked short selling and identity theft over the past 20 years. I am a short seller. It was a long learning curve. These are very good questions! They put their finger on the lack of real support – I spent some time searching and didn`t have much luck figuring out what value short selling brings to the market, but many reasons why short selling is a bad idea for retail investors. I definitely came here for some enlightenment! Short selling is an essential part of speculation and absolutely necessary. Now, I`m not saying that short selling should be banned because most of your theoretical points are correct, but I want to point out that your argument seems to be that it only harms «good» companies that are risky or fail, and in reality, short selling may very well involve elements of market manipulation through carefully crafted analyst reports.
Prime brokers lend treasury account shares that are absolutely not allowed to be loaned. They lend them to short sellers to make it easier for them to adjust their naked shorts. Stripping has been officially classified as illegal in the United States. and Europe after the 2008/2009 financial crisis. There are many people whose job is to find an overvalued business, hide a loss, or be directly involved in fraud and sell that business. Let`s say you found out Bernie Madoff was a con man. You could sell his mutual fund and then tell the world about it. Many real scammers are caught this way. What`s wrong with that? What for? No one is ever forced to short sell or even buy. The hard truth is that investors don`t stand a chance against naked short sellers. It`s a game that has been rigged in favor of a clever cartel and a Wall Street giant.
Lending shares held by an investor by a third party should be illegal. In 2013, a subsidiary of Charles Schwab was reprimanded by the SEC for an overdraft selling program and fined $8.2 million. Hmmm yes, I guess you wouldn`t need a subreddit as this is a general short selling of the market. I was thinking more about short-circuiting scam companies Generalized shorts could have prevented the bubble from inflating too much. Overinflation ultimately cost a lot of people a lot of money and caused many businesses to dissolve or go bankrupt, destroying jobs. Edit: I`m thinking more of the art of Hindenburg research of uncovering fraudulent businesses rather than betting against the economy. The shorting subreddits that are legitimate have combined less than 1k and the actual r/shortsell is actually perma banned because it is a subreddit to circumvent prohibitions on incel content (lol). – And more recently, Canadian Cormark Securities Inc. and two others have been under the SEC`s radar.
On December 21, the SEC issued cease and desist orders against Cormark. It also settled charges against Cormark and two other Canadian-based brokers for «providing false information about orders that resulted in repeated violations of the SHO settlement by an execution broker.» According to the SEC, between August 2016 and October 2017, Cormark and ITG Canada caused more than 200 sell orders from a single hedge fund, worth more than $660 million, to be falsely labeled as «long» when in fact they were «short» – a clear violation of the OHS regulation. Cormark agreed to pay a fine of $800,000, while ITG Canada – one of the other accused broker-dealers – agreed to a fine of $200,000. Charging and fining Cormark is just the tip of the iceberg. The real question is on whose behalf Cormark did the naked short selling. Well, you don`t have to be the research organization. There are many, just read their reports when they come out and find out if you want to be brief. The reason I made this post is because there`s clearly a retail follow-up with these short search organizations, but these retailers don`t seem to be on Reddit. I`m new to this game, and I`m starting to learn how it works. The basics are quite easy to understand: many people buy, the price goes up, a lot of people sell, the price goes down. It seems fair enough from here.
But then I started talking about the short system, and how it affects the stock, and that`s just (IMO) stupid and unfair. I mean, in the market, there should be X ways to influence the market up and X ways to influence the market to go down. But in reality, there are 2 ways to influence the market (short selling, selling a stock) and only 1 to influence the market up. How can this be fair? What am I missing? Think of what I say as stupid phrases from a guy who doesn`t understand the system at all. I am legitimately fascinated by it. Why is the short-selling community on Reddit so small? The short selling subreddit is tiny compared to other stock communities, although it is a major financial tool. Am I missing something or does no one on Reddit have the $25,000 for a margin account? The recent GameStop saga battles short-circuit forces in retail, and it`s a wonderful thing to see – but is it an unnecessary stunt or the start of something bigger? The takeaway from last week`s events is that the term «short selling» has been introduced to the public and will certainly receive more attention.