Syncora Holdings Ltd. (fka SYCRF)

[mrholty]

Like the previous poster stated. Its generally impossible for the normal retail investor to short an OTC stock. However it can happen. I've used interactive brokers and been able to short high flyers in OTC land as they were willing to do so using shares owned by other IB account holders. They will charge an interest rate to do so and IB is generous in that they split that fee with the guy who is willing to lend his shares out. (i'm not sure how the rate is determined as I've never asked)

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In discussions with an old securities lawyer he told me that he believes the vast majority of short sales on the OTC stocks are basically an offsetting position created by market makers. This happens when a MM may be trying to put together an order say for 500k shares for a buyer at a certain price. Hes buying up shares at a little less but say he gets only 360k of what he needs. He doesn't want exposure overnight so he goes short the amount in his book. Then the next morning he removes his short, fills the rest of what he needs and then sells the full 500k shares to his buyer. Its generally an accounting position for the MM in OTC. Its also used during the T+3 time when companies have issued shares to people and the people want to convert them to be tradeable. My guess is the jump was teh MM trying to fill some large orders and couldn't by EOD.

Most of the time in these thinly traded securities you are selling to or buying from a MM. The MM then holds what he bought from you and then sells it for a few pennies higher. I believe this to be the reason you are seeing the ask move with the bid as the MM(s) are looking at the order books infront of them and moving both sides in tandem. They are just trying to scalp a penny or two/share. It also leads to somewhat a double counting of the shares traded.

Now, a caveat. When lots of volume is moving the MMs may just move aside and let the action trade against each other which then eliminates the double count of share volume but can lead to larger bid/ask spreads when either the buyer or sellers go on strike.