Help me understand Naked Shorts. (Sounds like a David Zucker film to me.)
The link you gave earlier says, “The illegal practice of short selling shares that have not been affirmatively determined to exist. “ If they don’t exist, how in the world does that affect the price of oil? And who turns around and purchases their non-existent shares? And why?
A typical naked short sale scenerio on these exchanges will be:
When investors call a broker to arrange to borrow stock to short, they are aware that short sales are subject to a standard three-day settlement period. This means the sell-side broker has three days to deliver the shares to the investor.
The broker is supposed to locate shares available to short prior to executing a short sale and make a determination that the shares will be delivered to the investor within the three- day settlement window. However, there are certain exceptions to that rule.
Some shares are on an “Easy to Borrow” list. For a stock on that list, investors can execute a short sale and the broker does not specifically have to locate, or contact the source of the shares that are being shorted. The broker has a “blanket” assurance about the borrowing capability for that security.
The naked short seller will sell the stock and then buy it back quickly before the two-day window closes. That way, there’s never a need to deliver the securities or prove they were available.
You get enough people with deep financial resources to cordinate such heavy naked short selling and a heavy increase in volitility, volume, and dramatic swings in stock prices can occur almost instantly.
They are in, and then out very quickly. Rinse, lather, repeat. They don’t sit around with the same positions for weeks or months.
The emergency rule from the U.S. Securities and Exchange Commission would require a short seller to borrow securities before executing a short sale for certain financial institutions. It would also require the investor to deliver the securities by the settlement date.
http://www.businessjive.com/nss/darkside.html
This is a little more direct about naked short seling....but I couldn’t get the site to load just now when I tried it. But it is EXCELLENT.
Apologies: The second link I sent you IS Deep Capture...which I profoundy reco you view. (About 1.5 hours)