Mike The Pike Productions Inc (MIKP)

[lbdave]

Certainly not trying to prove you are anyone wrong here, but there is an explaination of the finra daily short list, and what it means in relation to short, or naked short sells.

I could be wrong.. but until proven otherwise.. That's my opinion!

Sure the market makers are allowed to short securities to maintain a market, and yes I'm sure that power is many times abused, but those positions are generally closed during the day (for profit) but usually on very high volume days. The finra daily short results are a result of this example below.

Only one side of any transaction (buy/sell) will be printed to the tape, and any transaction handled within the same broker will generally always be handled as a long position. If in fact a transaction is handled between brokers it will often appear as a short sell, especially in a volital or illiquid security. This is done to protect the market maker from getting stuck or holding inventory.

Example: You have 100 shares for sale through broker A, and someone else has a buy order for 100 through broker B. If broker A buys your 100 shares, and sells them to broker B, then a long sell is printed to the tape. This type of transaction can leave the market maker at risk if the buy order is filled by someone else, or the order being canceled in which case he would be stuck with an inventory of 100 shares. On the other hand, If broker A first sells a 100 shares to broker B, then buys your 100 shares, this transaction would be booked as a short sale even though it was covered immediately. This protects the broker from being stuck with inventory, and is the reason so many shares show as short sales on the finra daily list. Technically he did sell the shares short (for protection) and covered immediately but the short sale will still show on the daily list.