abu_penny
31-12-2002, Tue 3:35 AM
hi
Naked Shorting ***
The illegal practice of short selling shares that
haven't been borrowed, or that don't exist ***
Canadian exchanges do allow for shorting of OTCBB shares. However, the actual amount of shorting in these shares by individuals is probably a lot less than most people think. For some reason, every time an OTCBB stock goes down it seems someone starts screaming "naked shorts". The facts are that although Canadian securities regulations do allow OTCBB and other low priced shares to be both marginable and shortable, the amount of collateral required is large. For instance, to short an OTCBB stock selling for under 50 cents per share, Vancouver Stock Exchange rules require the account must have credit equal to the market value of the shorted stock plus 50 cents per share. Can an American short OTC BB shares this way? This is where it gets sticky - US regulations say no. This is almost certainly one of several areas in which the ongoing SEC investigation of Canadian brokerage firms is focusing upon. More on this later.
Just about every stock promoter likes to trot out the "naked shorting" excuse when the stock they are hyping is falling. With 20/20 hindsight (and some help from regulators' legal briefs) we can often see that these same stock were declining not because of "naked shorting" but because insiders, control persons as well as the promoters themselves were dumping huge blocks of stock into the open market. Thus, they were using the "naked shorting" excuse to cover their tracks and perhaps entice gullible investors into buying more of the stock, which is likely the promoter's own shares. Often, this selling and shorting is being done through Canadian brokerages
good luck
Naked Shorting ***
The illegal practice of short selling shares that
haven't been borrowed, or that don't exist ***
Canadian exchanges do allow for shorting of OTCBB shares. However, the actual amount of shorting in these shares by individuals is probably a lot less than most people think. For some reason, every time an OTCBB stock goes down it seems someone starts screaming "naked shorts". The facts are that although Canadian securities regulations do allow OTCBB and other low priced shares to be both marginable and shortable, the amount of collateral required is large. For instance, to short an OTCBB stock selling for under 50 cents per share, Vancouver Stock Exchange rules require the account must have credit equal to the market value of the shorted stock plus 50 cents per share. Can an American short OTC BB shares this way? This is where it gets sticky - US regulations say no. This is almost certainly one of several areas in which the ongoing SEC investigation of Canadian brokerage firms is focusing upon. More on this later.
Just about every stock promoter likes to trot out the "naked shorting" excuse when the stock they are hyping is falling. With 20/20 hindsight (and some help from regulators' legal briefs) we can often see that these same stock were declining not because of "naked shorting" but because insiders, control persons as well as the promoters themselves were dumping huge blocks of stock into the open market. Thus, they were using the "naked shorting" excuse to cover their tracks and perhaps entice gullible investors into buying more of the stock, which is likely the promoter's own shares. Often, this selling and shorting is being done through Canadian brokerages
good luck