Bankrupt and Distressed (BAD) Research and Due Diligence

[pinkyringcapital]

stoman23 - FINRA daily short sale report

Finally had a chance to call FINRA. The daily data for the short sales report all instances where the member firm has marked the sale as a short sale. Doesn't matter if the short is naked or not. They are all reported as such. However, here's the rub that causes this daily to become somewhat useless for us. Many times a member firm will execute a trade as a "riskless principal" transaction.

http://www.finra.org/Industry/Regulation/Guidance/p038942#302

In this case the trade is essentially broken into two parts, the member firm gets your sell order, sells the stock (short) to the market then buys the stock from you. You don't realize the difference and the trade was essentially a long holder selling stock. But, this is reported as a short sale because of the way the member firm handled it.

Periodically the member firms report their short interest in each particular stock. This reported short interest is actually the number of shares short on that particular date. This number includes both naked short sales and short sales upon which shares have been secured.