Anyone care to enlighten me about how the numbers add up on L2? I have read a few commens on it but I remain befuddled because of the blatant corrupt misuse caused by naked shorting. Let me explain my dilemma.
Naked shorts create a contract with the broker to 'borrow' shares. Are the amount of shares in contract show up on L2 then? Or only when they 'sell those borrowed GTCH shares".... or even then?
Upon selling borrowed shares, I can see how L2 would reflect that sell... in actuality these GTCH shares remain in the retail owner's account but the 'right to sell' is temporarily given to the naked short (via being borrowed).
Since it is my understanding that L2 reflects the count of both the sell and buy 'spontaneously', I get confused when another poster states that there "are more buys than sells" or visa-versa. How can you sell shares that were not bought? The answer, I guess, lies in the fact that MMs can buy but their shares do not show up on L2??? Why does this feel so wrong? That would mean that sell of shares occurred but on L2, nobody bought them? Crazy math!
Confounding the matter even worse is the fact that the naked short will eventually buy back to replace the shares they borrowed. It could happen on the same day. Then.... L2 reflects not only an 'artificial' sale of borrowed shares but the purchase of actual retail shares to replace them (thus a double-count transaction on L2 as a result of a naked short contract). As I currently understand it.
Returning back, if it is actually the case, to where MMs held off actually selling shares (leaving the shares on the 'to be sold' shelf) but now want to sell them.... They do but according to L2, there is no seller this time but instead just a buyer. Go figure.
In other words, the account of trades on L2 really doesn't reflect actuality but rather a generic blend of what is actually going on behind closed doors - kept secret to the prying eyes of the retail traders.
Please feel free to explain to me that I am full of crap! Ignorance is bliss until it affects your wallet.
