Dooley's stock picks

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Katman1
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Tuesday, December 14, 2010 1:12:48 PM
Re: None Post # of 13485
This Is something to look into ! I found this doing my DD.

Market Makers are able to short stock, this can lead to price manipulation. You may not know it but some of this is naked short selling or even legal short selling using your own shares against you which can lower the stock value and adversly affect your investment, Market Makers do this by "borrowing" shares to cover their shorts, your shares possibly. The only place Market Makers can borrow shares from is other Market Makers or brokers and guess what brokers have plenty of - thats right, their clients shares - your shares. Why would you want your shares loaned out to use against you and adversly affect your investment while the Market Makers use those shares to make money for free off of what you paid for? This is common in penny stocks (although naked short selling is illegal it still happens frequently in penny land). The solution may be to make sure your own shares are not used against you is to tell your broker in writing to not do this, it is your perfect right to do as they are your shares. If all share holders would do this the supply of free shares available to Market Makers for shorting would dry up, then they would be forced to actually buy their shares and do a lot less shorting and as a result a lot less price manipulation. A lot of brokers will tell you this is not a problem and they do not do this, however, behind the scenes they will do this and without specific denial of permission in writing from you they can legally loan your shares to Market Makers. Here is one post from a user who explored the matter and the information discovered:


TD Ameritrade Policy Regarding Loaning Shares to MM

There has been a lot of discussion the last couple of weeks on how Market Makers are using your BEHL shares for thier benefit. This is TD Ameritrade's policy. Is was also posted to the slum this morning….I doubt it will stay up for very long…..I finally will get around to locking up my
4M+/- shares...



"Thank you for contacting TD Ameritrade regarding loaning shares. A margin account lets investors borrow funds from their brokerage firm to purchase securities on credit using account assets as collateral. All securities held in the margin account may be pledged, re-pledged, hypothecated or re-hypothecated, without notice to the account owner.

As stated in your account Terms & Conditions, TD AMERITRADE can lend any securities held on margin to itself as broker or to others, unless and until TD AMERITRADE receives written notice of revocation from the account owner. If you wish to not have your securities loaned out, you will need to either:

1) Reduce your debit balance to zero by liquidating securities or depositing funds to pay the debit amount.

Or

2) Elect to have all securities in your account exempt from being loaned. Your request will apply to all positions in your account. Requests cannot be made for specific securities only. If you prefer this choice, send a written request stating that you do not want your securities loaned. We can only take this request in writing, so please mail it to:

TD AMERITRADE, Inc.
Attn: Security Lending
1005 North Ameritrade Place
Bellevue, NE 68005

Please be sure that your request is received 10 business days prior to any ex-dividend date to ensure your shares are not loaned on the ex-dividend date. Please keep in mind that your request will apply to all positions in your account. Requests cannot be made for specific securities only.

Sincerely,
TD AMERITRADE
Division of TD AMERITRADE, Inc."

Other brokers have similar if not exact procedures, Schwab is similar. Its recommended that you follow the advice above with your own broker. If you contact them they may try to lead you away from doing this, do not let them do that, demand their exact procedures for doing this and put your request in writing to them and in line with their procedures. I would recommend certified mail so you will get a return receipt - do not email or fax or transmit electronically - do an actual physical letter to them and go to the post office and mail it in an actual envelope as certified mail. Make sure you sign it and are very specific as to not granting permission for your shares to be loaned, also make sure you meet any time lines or requirements outlined in the broker instructions. If you agreed to let your shares be loaned when you opened your account this letter will override that and remove that permission. You do remember snail mail don't you :)

You can search Google for more information on shorting stock. This is a good video here at MarketPlayground you can view which does a pretty good job of showing what goes on for shorting > http://marketplayground.com/forum/showthread.php?740-One-take-on-Shorting&p=15826#post15826

Good luck

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original post courtesy of katman1

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=57750620

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