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Astec Analytics, a division of SunGard Data Systems, provides investors with short selling market color using data from the securities lending market.
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  • Most expensive stocks to short 10 comments
    Sep 30, 2010 4:44 PM | about stocks: PCBC, STSA, MIPI, SCOK, HMPR, CPF, RXPC, ZN, TSTC, PABK, AMBC, CGA, HDY, MCBC, DEAR, ABCW, CBC, HLCSQ, CHBT

    Here's a current list of the most expensive short trades right now in the US market, according to the cost that institutional investors charge broker dealers to borrow stock.

    SymbolCompany NameShares BorrowedUtilization Rate
    PCBCPACIFIC CAP BANCORP NEW6,139,11199%
    STSASTERLING FINL CORP WASH7,266,41496%
    MIPIMOLECULAR INSIGHT PHARM INC1,290,21799%
    SCOKSINOCOKING COAL & COKE CH IN257,74190%
    HMPRHAMPTON ROADS BANKSHARES INC955,79398%
    CPFCENTRAL PAC FINL CORP4,364,66090%
    RPCRADIENT PHARMACEUTICALS CORP1,511,30090
    ZNZION OIL & GAS INC737,514100%
    IFLGINFOLOGIX INC259,14099%
    TSTCTELESTONE TECHNOLOGIES CORP826,81392%
    PABKPAB BANKSHARES INC170,37197%
    ABKAMBAC FINL GROUP INC41,450,29276%
    CGACHINA GREEN AGRICULTURE INC1,472,20093%
    HDYHYPERDYNAMICS CORP3,017,74689%
    MCBCMACATAWA BK CORP1,435,04167%
    RINORINO INTERNATIONAL CORPORATI1,862,71878%
    DEARDEARBORN BANCORP INC1,018,864100%
    ABCWANCHOR BANCORP WIS INC2,520,27155%
    CBCCAPITOL BANCORP LTD2,455,23397%
    HLCSHELICOS BIOSCIENCES CORP2,118,86069%
    CHBTCHINA-BIOTICS INC2,208,409100%



    Disclosure: No positions
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Comments (10)
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  • What's your take on the naked shorting of CCME?
    5 Oct 2010, 02:32 PM Reply Like
  • Author’s reply » otatais,

     

    Thanks for your question. When you say "naked shorting", I want to be clear that the data that we collect from the securities lending market has nothing to do with naked shorting. The borrow volume that we see in the securities lending market are broker dealers that are by definition NOT enablers of naked shorting...because they're borrowing stock in order to deliver it to long buyers on the other side of a short sale.

     

    Regarding CCME, we've seen increased borrowing and shorting activity since early June. As often happens in any market, people in the know were able to borrow and short hundreds of thousands of shares for a few months at relatively inexpensive borrow rates. Then other market participants began to realize what was going on, other hedge funds piled into the trade, and the cost-to-borrow increased exponentially starting in early September.

     

    Currently, the utilization rate (the number of shares borrowed from institutional investors divided by the number of shares those same institutional investors have available) is at 99.7% so CCME is almost impossible to borrow. The cost to borrow is also extremely high.

     

    Short interest was reported as 3.3 million on Sept 15. Shares borrowed in our system increased 35% from Sept 15 to Sept 30, so I would expect a similar jump in short interest when it's reported for Sept 30.

     

    Please let me know if you have any other questions. It's not that I don't want to talk about naked shorting, but it's technically illegal (excluding legitimate market making).
    6 Oct 2010, 09:53 AM Reply Like
  • Author’s reply » otatais,

     

    I just put in a chart for CCME in another blog post, so please take a look.
    6 Oct 2010, 10:02 AM Reply Like
  • Thanks for the reply shortseller. I asked about naked shorting with CCME as it has now been on the naked short list for 8 days and I don't know what that means exactly with regard to the prospects of the stock, are you able to offer some opinion please?

     

    www.bloomberg.com/apps...
    7 Oct 2010, 10:31 PM Reply Like
  • Author’s reply » otatais,

     

    Unfortunately, you can't make any trading decisions based on a stock being on the threshold list for X number of days.

     

    As you may know, Reg SHO requires broker dealers to close out any failure-to-deliver positions that they have in a threshold security that has been on the threshold list for 13 consecutive days. However, broker dealers are not forced to close-out their failure-to-deliver positions. Rather, the broker dealer that doesn’t close out is only penalized. The penalty is that the broker dealer cannot execute further short sales in that stock without a “bona-fide” locate or pre-borrow arrangement. Therefore, there will not necessarily be buying activity (significant or otherwise) on the 14th day that a stock has been on the threshold list.

     

    Does that answer your question?
    8 Oct 2010, 11:45 AM Reply Like
  • Thanks for that shortside. I understand better now.
    I guess my concern is with the possibility of naked shorting on this stock.
    I don't understand how naked shorting happens and what it means. As i understand it naked means a short position borrowing shares that don't actually exist.
    If it's possible to do this how can we ever know how many shares are actually short?
    Is it theoretically possible then to short more shares than exist in the float?
    And if shorts are prepared to do this with a stock, does that imply an organised attack against the stock or at least a situation that should raise a red flag for a long?
    9 Oct 2010, 07:28 PM Reply Like
  • Author’s reply » otatais,

     

    Naked shorting is when a prime broker sells shares short on behalf of his hedge fund client but does not borrow the shares and does not deliver them 3 days later to the long buyer. However, naked shorting is not necessarily unacceptable. There may be a perfectly acceptable reason for a broker to fail to deliver. For instance, if the broker is acting as a market maker and provider of liquidity. But the broker should attempt to settle his failure as soon as possible.

     

    The SEC discourages failing to deliver and penalizes brokers that have outstanding fails. The penalty is that brokers are not allowed to short sell any other shares of that stock if they have an outstanding fail. Of course it's possible that a broker could naked short sell a significant number of shares and simply not short any additional shares but still have that outstanding fail to deliver.

     

    I can't speak to the prevalence of naked shorting because our database only touches on shares that have actually been borrowed.
    29 Oct 2010, 10:45 AM Reply Like
  • Thanks again for the comments. I'm trying to understand the possible implications of the very high short interest in CCME.
    This company has extremely strong fundamentals and very sound cash postition - as audited by Deloittes (important for a chinese co in the current sentiment towards china co's)
    Many longs are expecting a short squeeze to develop here. I am skeptical of such scenario as I don't understand how predictable such an event would be. I suggest you keep an eye on it as a real battle going on here between shorts and longs. The stock price has doubled in roughly 3 -4 weeks so far, but short interest has not abated.
    30 Oct 2010, 07:07 PM Reply Like
  • I believe CCME was just another Chinese ADR in the basket the shorts felt would not make it. I expected to see articles claiming fraud but apparently there is nothing the shorts can use to smear the company. Unfortunately for the short campaign, these companies are not frauds, china is indeed a growing real economy and most of these companies are deals of a lifetime. Watching the shorts roast like this is once in a lifetime. This is fun.
    2 Nov 2010, 08:45 AM Reply Like
  • Your dead right there. There is little to no more fraud in China small caps than US as is now becoming clear, though they do need to improve their standards.
    CCME is a superb company as audited by Deloittes and it's interesting to see such a high short interest in a business executing so well.
    It seems we are witnessing a short squueze, first time for me, which is why I wanted to know about the ramifications of such high short interest and the naked shorting that was going on with the stock.
    3 Nov 2010, 03:19 PM Reply Like
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