Southridge Enterprises Inc (SRGE)

[stervc]

Why “Now” No Ameritrade with SRGE…

Let’s presume that you and some of your friends decide to research a stock called SRGE. Now let’s presume that you and your friends really like what is researched and all decide to buy some shares of SRGE from the open market. Later, you see that SRGE has released news which not only furthers the belief of your research, but SRGE indicates what its official share structure is. SRGE announces that its share structure is as indicated below:

http://www.southridgeminerals.com/investor.htm
Issued and Outstanding 545,874,868 shares
Public Float 215,957,230 shares
Restricted Shares 329,917,638 shares

You later see that SRGE has a Float of 215,957,230 shares. To understand where I am going with this, let’s presume that each of you now decides to buy a certain amount of shares which equates to the entire Float of 215,957,230 shares.

Each brokerage company has a set amount of shares coordinated through their Custodian of Accounts that’s to be used as inventory of stock to fill supply and demand requests for buying and selling shares.

When they run out of shares, they usually coordinate with other market entities (Brokerage Companies, Clearing Houses, MMs, etc.) at all levels to either get shares or to have shares confirmed to exist to be delivered T+3 (Trading Day + 3 Days). Now imagine another person places an order to buy 1,000,000 shares of SRGE before Ameritrade receives this confirmation. Ameritrade now sell those shares as Naked Short Shares on the presumption that they will not “Fail to Deliver” the shares T+3 days. Now compound this issue.

This is the norm so Ameritrade allows the shares to continue being purchased thinking that the inventory of stock for SRGE shares will never totally deplete throughout its connections or throughout the market. As T+3 expires and Ameritrade now realizes they have an imbalance of inventory for SRGE shares that needs to be seriously rectified, Ameritrade begins to reach out to their contacts (Brokerage Companies, Clearing Houses, MMs, etc.) for help, but they realize that they have the same problem too. Now Ameritrade stops allowing any of their clients to buy more shares of SRGE to keep from having the problem of “Failures to Deliver” SRGE shares in T+3 days get worse.

To help fix the problem, they remain silent about such and stop any of their clients from being able to buy SRGE. Then they allow those clients that they had previously allowed to buy SRGE shares to sell them to help them to help fix the problem or lessen how bad the issue really is.

Now, in the meantime, keep in mind that shares of SRGE are all gone based on the Net data reflected within the SEC database as of 30 Sep 2012. Since the buying volume for SRGE has increased, it is logical to think that there will be a Net balance of Failures to Deliver for the month of Oct 2012 for SRGE in Naked Short Shares which hints towards this problem with Ameritrade probably not being resolved.

Understand that when I say “Failure to Deliver” I mean deliver in this sense to “officially account for” since your shares are held in street name within your brokerage account and are not physically held by you. This means that a cyclical movement of accounting takes places as shares are moved or borrowed up against in the amount that is ever inquired for accountability.

So now, Ameritrade sits there with your shares of which were “Fails to Deliver” that needs to be covered. Before Ameritrade realized that such lack of inventory of SRGE shares were going to be an issue, Ameritrade allowed their clients to buy more and more shares of SRGE which contributed towards the deficit of shares being “Naked Shorted” continuing to grow. The inventory for SRGE shares is zero. This is why you are now allowed to sell your shares that you have in your Ameritrade account, but are not allowed to buy shares from your Ameritrade account.

For inquiring minds, Ameritrade is one of the most important clients of Knight Securities, known as NITE within the market. This is the logic that justifies why some have learned and link that there is a huge naked short position needing to be covered by NITE.

The goal is for overall the issue to be rectified and to simply allow SRGE to trade correctly based on its true supply of shares in its inventory generated by the demand to own the shares by investors from the public. For inquiring minds, yes, I have spoken to an Ameritrade representative that has confirmed the above thoughts that I have shared to explain the issue of why sometimes, Ameritrade stops their client from being able to buy shares in a stock at which at one time Ameritrade was allowing their clients to buy.

v/r
Sterling