Found this explanation which destroys the daily report that is posted here and on the outerweb to fool naive investors into blaming a declining PPS for shorts when they have nothing to do with it in pennyland.
The OTCShortreport is the short volume not the short interest.
The OTCShortreport uses the FINRA Daily Reg SHO data, it is meaningless on it's own. The Trade cycle is Trade Date plus 3 days for settlement, Daily Reg SHO only shows the Initial leg of each transaction and doesn't reconcile based upon settlements made seconds later as the trade has yet another 3 days to settle.
MMs do not "short" penny stocks. As part of making a market, they may have periodic short positions throughout a trading day if they fill buy orders for more shares than they have in inventory, but they also often have inventory when they fill sell orders. Having an inventory does not mean that they are going "long" any more than having a temporary net short position is "shorting." This kind of temporary short position is legal and necessary for efficient trading.
The FINRA daily short data does not show true short positions and that the Bi-Weekly report is the only reliable one. It also explains that when new shares are entering the market, they are reported as short until the stock is delivered.
The short data for all OTC stocks including those quoted on OTC Markets (fka Pink Sheets) is sent to FINRA twice a month by broker/dealers. FINRA compiles it and publishes a semi monthly report. These bi-weekly reports show the aggregate short position by all market makers as of that settlement date.
Here is a example of just the OTCShortreport provides worthless information. Let's look at AEGY - suspended by the SEC and on the Greys - therefore it isn't being quoted - so it is impossible to short.
But accordding to the OTCShortreport we have the following:
Date Close High Low Volume Short Volume % of Vol Shorted
Jan 31 NA NA NA 6,958,513 2,900,000 41.68%
Jan 30 NA NA NA 1,997,650 1,200,000 60.07%
