SK3 Group Inc. (SKTO)

[BigBake1]

Such nice presentation but man is it completely all wrong. First issue is the data you are claiming to be Fails To Deliver data is in fact Daily Reg SHO SHORT VOLUME not FTD. FTD data is a Bi Monthly report distributed by the SEC from the DTCC. The most current FTD report ended March 15th, 2013. So for you to claim the data as FTD for second half of March and the first half of April is completely false.

http://www.sec.gov/foia/docs/failsdata.htm

And here is the actual data that has been archived:

http://www.sec.gov/foia/docs/failsdata-archive.htm

But lets just assume for one moment the FTD data is that high, which it is not and if one is curious as to the last FTD position here it was October of 2012:

  
 20121017 78440L107 SKTO 1974 SK3 Group, Inc. Common Stock 1 
 20121018 78440L107 SKTO 1974 SK3 Group, Inc. Common Stock 1 
 20121019 78440L107 SKTO 1974 SK3 Group, Inc. Common Stock 1 
 20121022 78440L107 SKTO 1974 SK3 Group, Inc. Common Stock 1 
 20121023 78440L107 SKTO 1974 SK3 Group, Inc. Common Stock 1

So we can see here a whole 1974 shares were FTD for a period of time of 5 consecutive days, my gawd that is just.. huuu…. Oh wait that is nothing at all, sorry no drama here for FTDs. But either way lets just assume it was 200 million shares, what does Fails To Deliver really mean? Well it certainly does not mean Naked Short Sales, because the SEC on that original link provided makes it very clear that one cannot determine the actual cause of a Failure to Deliver, they post this nice little note to remind people:

Please note that fails-to-deliver can occur for a number of reasons on both long and short sales. Therefore, fails-to-deliver are not necessarily the result of short selling, and are not evidence of abusive short selling or “naked” short selling. For more information on short selling and fails-to-deliver, see http://www.sec.gov/spotlight/keyregshoissues.htm, http://www.sec.gov/divisions/marketreg/mrfaqregsho1204.htm, and
http://www.sec.gov/rules/final/34-50103.htm.

So sorry but not even an FTD is proof of NSS nor is it proof short selling as per the SEC. Now you may ask why is that? Well because SEC Rule 200 which governs what gets marked as “Short Volume” has nothing to do with an actual short position but in fact it is simply a “mark” to show OWNERSHIP. Here in the OTC trading is through QUOTATION as opposed to exchange listed securities which are AUCTION. MMs use a process called RISKLESS PRINCIPLE in order to provide liquidity in the market and a good example is the following:

I have 2 million shares SKTO on the Offer, You want to purchase just a million of them, you place an order to your broker, due to the fact we use different brokers which use different MMs the orders gets uplined to an ECN and then picked up by an MM. Here is opportunity to make a market, the MM first sells “short” to you for 1 million shares on the initial leg of the transaction. That transaction is the only leg recorded in the DAILY REG SHO SHORT VOLUME report and does not get reconciled. This transaction also gets reported to the consolidated tape and then to FINRA. Now on separate leg of the same trade transaction the MM now buys from my 2 million shares the 1 million needed to “COVER” the transaction, this gets reported in a NON TAPE TRANSACTION REPORT to FINRA. This avoids duplicating consolidated tape volume and meets compliance with regulatory reporting requirements.

So as you can see it less than exciting, in fact it is much like watching paint dry, the magic is really not magic. But what I really find humorous is that there are no Reg SHO Flags on this security and to state as such is quite misleading since first the FTD reports have yet to come out for this period let alone the period before it and so there is no way FINRA would be showing a 4320 requirement. Anyone wanting to keep an eye on it you can do so here:

http://www.otcmarkets.com/stock/SKTO/short-sales

In fact even the Short Interest here is meaningless, so I am not sure why all the talk about shorting when the FTD report shows no Failures to Deliver here and if one wants to keep an eye on that data here is good place:

http://failstodeliver.com/default.aspx

So no FTDs and no Short Interest and the only thing posted is meaningless Short Volume data which has up to T+3 before becoming an FTD. T+3 by the way is Trade day Plus 3 days for settlement as per securities laws. The majority of trades are covered within seconds if not minutes on the same trading day, in fact the SEC claims that the OTC with it’s electronic trading and clearing and settlement process achieves a 98% settlement rate of it’s trade at T+1. Thus why they are looking into changing the settlement period to T+1.

Sorry to burst the bubble on the “squeeze” as one will never happen here as there are no shorts to squeeze as per regulatory documents provided in this post.