Re: All About Stock Market and Indian stock market

On Jan 28, 11:21 pm, "bluemax...@xxxxxxxxx" <bluemax...@xxxxxxxxx>
wrote:
All About Stock Market and Indian stock market

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The Problem

Short selling is a bet that a stock price will decline. A short seller
borrows stock and then sells it, hoping to buy back the same amount of
stock later, at a lower price, for return to the lender. Short selling
is legal.

Naked short selling involves selling stock without first borrowing (or
sometimes even locating) the stock. If a naked short seller does not
borrow the stock he sold, he will be unable to deliver that stock to
the buyer to close the transaction. This is called a "failure to
deliver" (FTD). Naked short selling is generally illegal, though
market makers are allowed to temporarily naked short for the sake of
bona fide market making. FTDs are always illegal when delivery failure
exceeds 13 days.

Exchanges do not disclose whether short sales are naked and supply no
information on FTDs. Even worse, in transactions where shares are not
delivered, brokerages issue stock IOUs called "share entitlements."
Retail customers' account statements do not distinguish between real
shares and share entitlements.

FTDs create phantom shares that circulate in the system as real
shares. Just as counterfeit currency dilutes and destroys value,
phantom shares deflate share prices by flooding the market with false
supply.

Some short sellers use naked shorting and oversupply of phantom shares
to manipulate stock prices downward. Because regulations are loose and
enforcement lax, they are unafraid of failing to deliver.

Customers holding phantom shares can, and often do, re-sell those
phantom shares as if they were real. Subsequent purchasers do not
receive real shares; instead they receive only share entitlements.
Phantom shares sold by naked short sellers are thus laundered in the
market by subsequent transactions in which share entitlements come to
resemble (but cannot become) real shares of stock.
.

Relevant Pages

  • SEC: Ban All Short Selling
    ... SEC: Ban All Short Selling ... We suffer a loss of Market Integrity; The US is now a Banana ... whether bears illegally drove down stock prices of financial firms. ... curbs on the practice that went into effect Thursday morning. ...
    (misc.invest.stocks)
  • Re: Investor Education
    ... Most of us are taken back with the stock market crash of late eroding ... to understand the concept of short selling. ... Short selling is selling of a stock which is not owned by a seller. ... trader Ram feels that stock price of company XYZ ...
    (misc.invest.stocks)
  • Re: As Stock Market Rallies, Insiders Sell: TrimTabs
    ... Of course insiders were selling. ... Also in a rising market folks should always be selling. ... Most insiders have lost their shirts. ... As Stock Market Rallies, Insiders Sell: ...
    (misc.invest.stocks)
  • Daily Threshold Securities List (Naked Shorts) Link.
    ... Short selling is a bet that a stock price will decline. ... If a naked short seller does not ... FTDs create phantom shares that circulate in the system as real ...
    (misc.invest.stocks)
  • Daily Threshold Securities List (Naked Shorts) Link & Information.
    ... Short selling is a bet that a stock price will decline. ... If a naked short seller does not ... FTDs create phantom shares that circulate in the system as real ...
    (uk.legal)