soy - the issue is that the insiders and market makers in stocks have been conducting naked short selling for years now. Meaning they are selling shares they not only never owned, but didn't even borrow from anyone else who did own them. They have sold them as accounting entries to their client counterparties without those shares ever existing in the first place.
As long as the price remains stable enough that they can later buy them back and cover their shorts, and they did such things only in modest volumes, that wasn't too much of an issue. But in some of these short squeeze stocks, the "longs" caught on and bought up tons of the available shares and are refusing to sell them for anything short of "the moon". The naked short sellers firms then fought them, trying to force the share prices to go down by flooding the market with new fake shares. In the process they ballooned to net short 140% of the outstanding "float", and they cannot possible cover such huge (fraudulently created and entered) positions.
They deserve to lose everything they own, as firms, for having pulled that stunt. Desperate to avoid that fair outcome, they are instead now trying to buy the regulators, close the markets, prevent trading by bribing other brokers and processing firms, demanding government intervention to save them, and similar illegal and coercive nonsense.
The thing everyone should be asking is how it was even possible for the short sellers to enter positions that were net short 140% of the total outstanding float. The answer is there was and is no honest way for that to happen - any more than there is any honest way to win an election via 140% turnout.
I may let go of my handful of GME shares once I have a Maserati sitting in the driveway that I purchased at the bankruptcy auction of a hedge fund manager billionaire. Until then, it is money I can afford to lose, since I never had it to begin with.
Knowing that Griffin, Both Cohens, and likely a couple of other Democrat-owning billionaires could be homeless over this warms my wallet.
This is mostly correct and a very good job of simplification.
Add in a bit about leverage, margin maintenance requirements, and rehypothecation and you'l paint the whole picture.
The reason I said "mostly" correct is that an argument can be made for leverage being capable of creating greater than a 140% short ratio. It entails a ton of risk, and every party involved is aware of the rules and the risks of leverage. They are just trying to not have to pay for their mistakes and they'll argue systemic counter-party risk.
You can certainly argue that the current regulations are insufficient to protect from this type of manipulation, but it is certainly possible under the current regime.
soy - the issue is that the insiders and market makers in stocks have been conducting naked short selling for years now. Meaning they are selling shares they not only never owned, but didn't even borrow from anyone else who did own them. They have sold them as accounting entries to their client counterparties without those shares ever existing in the first place.
As long as the price remains stable enough that they can later buy them back and cover their shorts, and they did such things only in modest volumes, that wasn't too much of an issue. But in some of these short squeeze stocks, the "longs" caught on and bought up tons of the available shares and are refusing to sell them for anything short of "the moon". The naked short sellers firms then fought them, trying to force the share prices to go down by flooding the market with new fake shares. In the process they ballooned to net short 140% of the outstanding "float", and they cannot possible cover such huge (fraudulently created and entered) positions.
They deserve to lose everything they own, as firms, for having pulled that stunt. Desperate to avoid that fair outcome, they are instead now trying to buy the regulators, close the markets, prevent trading by bribing other brokers and processing firms, demanding government intervention to save them, and similar illegal and coercive nonsense.
The thing everyone should be asking is how it was even possible for the short sellers to enter positions that were net short 140% of the total outstanding float. The answer is there was and is no honest way for that to happen - any more than there is any honest way to win an election via 140% turnout.
I may let go of my handful of GME shares once I have a Maserati sitting in the driveway that I purchased at the bankruptcy auction of a hedge fund manager billionaire. Until then, it is money I can afford to lose, since I never had it to begin with.
Knowing that Griffin, Both Cohens, and likely a couple of other Democrat-owning billionaires could be homeless over this warms my wallet.
Best explanation yet.
Yep, naked shorting should be, and should have been for a while, a go to jail activity.
This is mostly correct and a very good job of simplification.
Add in a bit about leverage, margin maintenance requirements, and rehypothecation and you'l paint the whole picture.
The reason I said "mostly" correct is that an argument can be made for leverage being capable of creating greater than a 140% short ratio. It entails a ton of risk, and every party involved is aware of the rules and the risks of leverage. They are just trying to not have to pay for their mistakes and they'll argue systemic counter-party risk.
You can certainly argue that the current regulations are insufficient to protect from this type of manipulation, but it is certainly possible under the current regime.
Whatever happened to Creative Destruction?
This seems like a good place to put this:
If you want a resource for more information on Naked Short Selling, here's a link to the guy who knows more about it than anyone:
http://www.buyins.com/images/tomronk.pdf