Why isn't that statement clear? The short involved with a riskless principle trade is still a short and, per the regs, is reported as a short. True, most likely not an evil short, but you don't think that short should be included in the numbers because it inflates the numbers?
Riskless trades are only one part of the short-selling (usually retail) universe and are frequently used in discussions to divert attention from the real risks of short selling.
This can get tedious, but we're all climbing up the learning curve. So let your SEC-letter guy, Jess, who is obviously knowledgeable but doesn't include his company's name explain a riskless principle trade.
A riskless sale is one in which a broker-dealer, after having received an order to sell a security, sells the security as principal, at the same price, to satisfy that order. Regulations require broker-dealers to mark their proprietary riskless sell order as short if they don't own the security, even if the customer order to sell the security is long. Since broker-dealers generally don’t maintain a position, a significant number of such riskless sales are reported as short, even though the customer is selling long, and the broker-dealer intends to and will buy the shares from the long selling customer immediately after the proprietary riskless short sale takes place. Typically, the broker-dealer's position is short for considerably less than one second.
