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NAKED SHORTING...MUST READ!!

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Last Post: 5/28/2016 11:34:35 AM - Followers: 44 - Board type: Free - Posts Today: 0

This is why PR's, amazing quarterly reports/financials, etc. will never make a difference on company's that are Pinks and BB's. Good luck investing. IMO this is why "long term holder" is an oxymoron when trading these stocks; these are momonentum plays at best. If you are new to the BB/Pink Stock world please read this before investing any money in these companies. I strongly urge all that put $$$ into these companies to only use money you can afford to lose. The Market Makers are corrupt and are allowed to be this way due to the SEC. After you read this it will give you a whole new outlook, it did for me. My trading startegies have significantly changed since learnig this information. The Hundred Billion Dollar Loophole (05.07.02): There's a rule that the market makers use ... a rule that only has less than two hundred words in it ... and that rule allows them to naked short an OTCBB or Pink Sheet stock into oblivion. It allows them to literally create, out of thin air, as many shares as they need, to maintain an orderly market. "(B) Proprietary short sales No member shall effect a short sale for its own account in any security unless the member or person associated with a member makes an affirmative determination that the member can borrow the securities or otherwise provide for delivery of the securities by the settlement date. This requirement will not apply to transactions in corporate debt securities, to bona fide market making transactions by a member in securities in which it is registered as a Nasdaq market maker, to bona fide market maker transactions in non-Nasdaq securities in which the market maker publishes a two-sided quotation in an independent quotation medium, or to transactions which result in fully hedged or arbitraged positions." This rule allows a market maker to create a share in a company by simply taking the money from the buyer and making an electronic entry into their brokers' account, and the broker then electronically credits the buyer with one share of that company. But several things that no one is aware of take place in this transaction. 1. The buyer thinks that his share actually exists, but unless he or she has read his account agreement very carefully, he won't understand that all he did is give money to someone other than the company and never got any actual proof of ownership. His certificate, presumably, is sitting at the DTCC. 2. The market maker filling the order for one share has the buyer's money, and gave nothing except electronic acknowledgement of receipt of it ... the electronic entry in the buyer's account. One very important thing to understand here, is that at no point in this process, did the company in which the buyer 'invested' ever get one single dime of the money paid by the buyer for that share. There is a tremendous misconception out there that causes many to assume that when they buy a share of a company's stock, the company gets the money. This is only true if the buyer is buying an IPO, or a private placement of shares from the company. In any other sale or purchase of a stock by an investor, the company does not even see the money. This is particularly vexing when one begins to understand what happens in naked shorting situations. Situations where the provision that allows for naked shorting to maintain an orderly market is abused. Understand that whoever is doing the naked shorting is the one receiving the money. They keep it. For as long as it is convenient to do so. That is where the abuse of the rule comes in. That rule was created to allow for market makers, who by becoming market makers, agree to 'make a market' in certain stocks. That means that they will sell you a share, or buy a share from you, even if there isn't any available, or there are no other buyers for it. The Market makers' job is at least partly, to provide liquidity to the market. In thinly traded securities, or securities where there is a small public float, the market makers' ability to naked short is crucial to the liquidity of the market in that security. The abuse takes place when the market maker for whatever reason determines that the market for a particular security has become "disorderly". Too much buying pressure, for instance, can cause a price spike in that security that would have no relationship to the true book value of the security. The market maker then determines that he will naked short to fill orders, knowing that by doing so, the price will not explode on unusually high demand because he can literally issue new shares under this rule. The market maker then waits, with an open naked short position in that stock, until the buying pressure subsides, and he can buy enough shares back at lower prices to cover his naked short position. The rule does not have any time requirements and that allows for the market maker to keep a naked short position open for potentially years. In reality, until the buying pressure subsides enough for him to buy back at lower prices however many shares he needs to fill previously filled orders that make up his naked short position, it simply stays open, and the money sits in his account. Someone is going to ask the question, "So, how big are all those naked short positions, anyhow?" There is another provision that says that the market makers do not have to publish their open naked short positions. Never. At all. All OTCBB and Pink Sheet securities can be naked shorted - indefinitely - by market makers under this rule, and there is no way that an investor can discover if there is an open naked short position in a stock he may be interested in, or even how big that short position is. So far, the SEC does not see a strong need to correct this situation, either. Think about it. There are unlimited amounts of shares that were never authorized or issued by a company made available to the unsuspecting investor. They are authorized and issued by the market makers under this rule, and the company never gets any money from the sale of shares created under this rule. The temptation to abuse this rule is irresistable. Just do the math. A million naked shorted shares sold by a market maker at 0.01 (one cent) is $10,000 that the market maker keeps in his account, and that the company does not get. At 0.10 (ten cents) the market maker gets to keep $100,000. Now, that is for each million shares that the market maker creates. Under this rule, if a company and/or a group of shareholders begin to suspect a short position exists in their security, they can not discover this from any published source. The price of the stock remains constant, or goes down, even though there is unusually heavy buying ... buying that goes on for years in some cases. The company thinks that there is someone illegally shorting their stock in an attempt to ruin the company. The shareholders think that the company is illegally printing shares behind their backs and is scaming them. Eventually, this distrust between the company and it's shareholders becomes so great that investors start selling, or the company, already damaged by a supressed share price, is forced to issue additional shares into the market because other collateral-backed loans can not be made with share prices so suppressed. This is what the market maker is waiting for ... sometimes for as long as years. In both cases, the market maker eventually gets his naked short position covered, and all it cost was the company's reputation, the shareholders' money, and the SEC's full cooperation by allowing this abuse of the rule. There is a third situation that the market makers naked short into ... a stock that is a likely prospect for failure. In that case, they just continue naked shorting no matter what, keeping the price suppressed, and eventually the company files for bankruptcy, and ... the company goes out of business, the shareholders lose their investment ... and the market maker keeps the proceeds of his continued naked shorting. A good question for the SEC would be, "Seeing as how the companies that failed never got the proceeds of the sale of stock over and above their issued and outstanding, but the market makers did, isn't the SEC allowing actual fraud to take place, and condoning it by the creation and continued existance of this rule?" Like it or not, the SEC has allowed securities fraud to run rampant in the OTCBB and Pink sheet stock markets by simply looking the other way and allowing the market makers to target the OTCBB and Pink sheet markets as a source of huge amounts of cash, literally stolen from investors by the third party creation of shares by an entity other than the the issure - the company. This rule is nothing less than blanket permission by the SEC for market makers to become the issuers of company stock, no matter what the company's official authorized and issued amounts are. And that, my friends and fellow investors, is securities fraud on a scale almost beyond comprehension. Isn't capitalism great. One way to fight back on this is to email all the members on the House Committee of Financial Services (click link below). They oversee the SEC. We need 1000's of emails going to the Chairman of this Committee, all memebers for that matter, stating that this corruption must stop!! Come on people let's stand up for something and fight back on this. It will take a herculean effort to make our voices known. The next Chairman will probably be Barney Frank so maybe we can make a difference with a new Chairman. http://financialservices.house.gov/index.asp
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#167   Tom Ronk is a known bad actor XenaLives 05/28/16 11:34:34 AM
#166   US Supreme Court ruling today paves way to steam train 05/16/16 10:57:46 PM
#165   I know this is a very old post Marketdow 04/07/16 04:45:10 PM
#164   Leaked Cheating Texts That Will SHOCK YOU Nawab 12/12/15 08:17:33 AM
#162   Great online video of the crime of naked PhilCheeze 12/02/12 12:57:18 PM
#161   Good Article Here: http://www.cnbc.com/id/49655827 PPS 11/22/12 10:43:17 PM
#160   The Naked Truth? NYBob 11/08/12 08:43:59 PM
#159   The shorters always win. They destroy companies olandug 11/06/12 06:34:19 PM
#158   Fantastic article. Thanks NYBOB. olandug 11/06/12 06:27:08 PM
#157   Olandug, Your comments or any feedback in reference to BeauBeau 11/06/12 11:49:27 AM
#156   Accidentally Released - and Incredibly Embarrassing - NYBob 05/18/12 03:00:51 AM
#155   The big question: will Byrne stop funding "deep ctrumabll 04/05/12 10:57:39 AM
#154   http://seekingalpha.com/article/318773-overstock-com-naked-shorting-lawsuit-ends Toxic Avenger 01/12/12 01:17:45 PM
#153   Olandug, can you give me an example of Hangovertrading 12/21/11 06:32:57 PM
#152   No, that's a separate issue. Howzitgoing 09/10/11 01:29:29 PM
#151   does this mean the nss has to cover lottoplayerslair 09/09/11 11:01:52 PM
#150   FINRA Expands the Order Audit Trail System to Howzitgoing 09/04/11 04:36:02 PM
#149   good high_gear55 09/02/11 11:57:40 AM
#148   Hitler Reacts To News He's Been Using... TheViewMaster 08/31/11 11:18:32 PM
#147   it didn't do jack. i understand the mms lottoplayerslair 08/25/11 10:25:43 PM
#146   Good stuff. Howzitgoing 05/31/11 12:05:28 PM
#145   Interesting piece I got from Mo1: NeoSage 05/25/11 10:35:09 AM
#144   Hey Olandug, Here from another board,..Got limited on NeoSage 05/25/11 10:29:02 AM
#143   NEGS- hoping next week this finally pops. IN The Mouth Of Madness 05/22/11 03:24:21 PM
#142   is that really a pic of you in IN The Mouth Of Madness 05/22/11 03:22:16 PM
#141   Regulatory Notice 11-03 olandug 05/08/11 10:55:33 PM
#140   It will make manipulation by the MM's much olandug 05/08/11 10:41:12 PM
#139   Thanks for posting this information. What effect, ASimEE 05/08/11 06:32:32 PM
#138   Good find, but that post is at least Howzitgoing 05/06/11 11:31:27 AM
#137   MARKET MAKERS SHAKEDOWN: A MUST READ!!!!!!!! olandug 05/06/11 12:52:25 AM
#136   SEC Approves Amendments to Establish Regulation NMS-Principled Rules olandug 05/05/11 02:34:53 PM
#135   gran puta, de todo, de la cabesa , lottoplayerslair 04/24/11 12:16:15 AM
#134   Hey, old fart, now you are just trying Swimmingly 04/23/11 11:51:00 PM
#133   no, i give info ,for this message board lottoplayerslair 04/23/11 10:09:23 PM
#132   It is obvious that you are using this Swimmingly 04/22/11 11:30:49 PM
#131   images.investorshub.advfn.com/images/uploads/2011/4/22/kqkwqtrollface.png dougthehead 04/22/11 07:00:30 PM
#130   "while the truncheon may be used in lieu lottoplayerslair 04/22/11 06:40:33 PM
#129   Why use periods if you don't use uppercase dougthehead 04/22/11 06:36:52 PM
#128   scram beat it if you are not willing lottoplayerslair 04/22/11 06:35:44 PM
#127   I would rather discuss this in private. Please Swimmingly 04/22/11 02:52:57 PM
#126   you don't make sense. explain yourself please. lottoplayerslair 04/21/11 08:44:03 PM
#125   78% of all trading in otc and pinks fourkids_9pets 04/21/11 06:09:54 PM
#124   rockin like it was 1999? too bad it lottoplayerslair 04/10/11 01:37:04 PM
#123   Think of all the good that would result AlanC 04/10/11 01:33:37 PM
#122   education is key lottoplayerslair 03/29/11 02:13:32 PM
#121   UBSS and NITE are only retail players. Be Swimmingly 03/29/11 11:17:23 AM
#120   Knowledge is power. Thanks for pointing this olandug 03/29/11 01:43:16 AM
#119   78% of all market making in the pinks lottoplayerslair 03/28/11 12:49:20 PM
#118   This seems a bit confusing. Is there a Swimmingly 03/24/11 11:55:43 AM
#117   Yes, the Market Makers sell puts to hedge Brad S 03/24/11 02:01:36 AM
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