Naked Short Selling: The Scales Are Rigged

Naked Shorting: The practice of selling “virtual shares” to the open market with the intent of driving the price per share [PPS] of the underlying equity down so that you may purchase real shares at a cheaper price. You then deliver the shares bought cheaply to the party you’d originally sold “virtual” shares too and pocket the difference.

What a game! You sell a retail investor a counterfeit share. Then, if the price starts to climb, you sell more and more to progressively lower prices and fix a downward trend. No free market here. What’s worse, the retail investor cannot play this game – we can only be the victim.

Try to go through your broker and naked short 1000 shares of a company (shares that your broker does not own and cannot borrow), much less 2 million of them. This is illegal and your broker will have no part in allowing you to do this. Why then, are fund managers and institutions allowed to victimize the retail investor and American business in this fraudulent scheme to line their pockets at our expense?

Let’s look at it another way. What would the SEC do if you or I bought 2 million shares with some “virtual” money? We could just buy them with fake money above the ask price. If it tried to go down we could continue buying shares at ask or above with “virtual” money. After several days of the resultant extreme run-up in price we could slowly start selling our shares for the inflated prices and cover the virtual money – with us pocketing the difference.

Sounds ludicrous right? What is ludicrous is that the SEC allows this illegal victimization of our economy for the benefit of a privileged few by letting them pad their pockets with the proceeds of “virtual” shares. It’s one thing for a fund to have an advantage due to the billions they have under management. It’s entirely another to allow anyone to counterfeit shares on such large scales to steal money from the retail investor.

According to our laws the markets are supposed to be the ultimate arbiter of value and democracy wherein through equal access to information and a level regulatory playing field a company’s value is weighed. Well I must tell you, the scales are rigged.

Congress is currently looking at the practice of naked short selling. I encourage you to write your congressional representatives and demand that this type of illegal activity be halted.

Comments

[Go West]

Maybe 10 years ago this article (rant) would have been insightful.

[anonymouse]

Agree with you GW

[Arohan]

To GW: "Maybe 10 years ago this article (rant) would have been insightful."

However the problem is still not fixed. This has been a long time a criminal racket like this has been allowed to operate

-arohanvalue.blogspot.c...

[User 126423]

"so that you may purchase real shares at a cheaper price." Why? They never buy these shares. They selling “virtual shares” and at the same time buy puts. There are billions of unsettled shares at DTC. OSTK is suing these bustards. Generator77

[[e-mail]]

Can you tell me more, I have read all about this stuff by, Mr T. Bulter's quotes at on silverseek.com. thanks

[Chungst]

Michael Shaffer's article is flawed on a number of levels. The most obvious flaw is to sell naked options, be it ATM or OTM or ITM, requires capital. The last time I checked "capital" didn't grow on trees.

It would help if the author, at a minimum, understood how the options market works. The industry standard analogy of selling naked puts is akin to selling insurance and not selling "virtual shares."

[Chungst]

Correction -- naked short selling requires capital (which is the theme my reply) and I was using naked put selling as a analogy. Thank you.

[hilarious]

Hey clueless - buyins.net has tracking data on naked short selling. Its not a secret anymore as to what the short levels are or who or what is naked. Can it be done? Yes, but at a very steep price if a house gets busted. So no, this is hardly a major problem..

[jmarketwatcher]

Similar to naked short selling stock, look at shorting silver on COmex, and similar regularitory missing manipulation implications

[bupaya]

Take a look at

goldismoney.info/forum...

[bupaya]

Or go straight to the real presentation...

www.businessjive.com/