Replies to post #564831 on NorthWest Biotherapeutics Inc (NWBO)

[Poor Man -]

That’s an excellent point W. Shares are held by DTC in trust (hence the “Trust” in its name). Shareholders are not holding shares, they’re holding in effect contractual rights to those shares that exist in custodial accounts. It’s DTC’s job to manage the clearance and settlement process, and are responsible (and legally liable) for delivering those shares they hold in trust to shareholders at the appropriate time.

DTC has real time information on FTDs and naked short positions, and will act to address those issues when there are violations. DTC is the responsible party in all of this. I suspect that’s why CohenMilstein hasn’t brought a naked shorting claim, because they understand the system.

And that’s why this whole Wes C stuff about naked shorts and offshore accounts is just out of the Steve Bannon School of Business.

[Extremist223]

Your post is really misleading. One perspective an amateur could have is that sales and purchases net out to zero always because for every transaction there are two parties. In other words, for every share that moves someone bought and someone sold.

The naked short shares are what is needed for providing liquidity. They make smooth market operation. They give you the ability to buy from a market maker at any time during market hours. Unfortunately, they can also be used for wash trades. When you can sell even when you haven't located the share, strategies don't end when you can't locate another share. That's why particular stocks can become blackholes. (China NWBO)

For instance, if you couldn't lend the same share more than once (something that Wes Christian said was a technique) and if market maker couldn't create new shares, they would stop having the ability to generate a share and create a fake wash transaction that can move the price. It is exactly the powers bestowed by SEC on market makers that create all these problems. If shares really moved every time a transaction happened, it would be called 'market matching' instead. That is the better way. Investors would sometimes maybe have to wait for a real buyer/seller, not just someone that will take any bet right here right now, which is what continuous quotations are. They called themselves market makers, but they did more than facilitate matching a buyer and a seller. They become the seller and that is what being away from net zero really is all about. If China bought shares invisibly for years, then Griffins really are myths.

Your broker though may be execution only. Your broker would be facilitating your participation against market makers, but not taking the bet themselves.

Phantom shares are exactly what happens when a Bill Gates size character decides to short sell against thousands of smaller individual investors. What would happen would be he would get to 100% of the outstanding shares short and he should not be forced to quit at that point. If he still is solvent, he should be able to continue his short sales and sell to anyone who wants to buy. We also know that market makers at times can have 'roughly unequal' purchases and sales. Which means they can do the same thing as Bill Gates and facilitate participation.

What part about a phantom share is a violation of their duty? They did not issue a new share, they didn't locate an existing real one, so a phantom share to me is just a financial contract between the participant and whatever market maker had the quotation up. I think what we are really seeing is just a lot of volume one would think is real participation, when in fact it's the creation of the circus. That becomes more likely for rarer stocks.

[Chiugray]

WW,

Here's how I understand it. If the DTCC warehouse says 1 share is available to lend out for shorting, the DTCC would record a minus 1 share liability and a 1 share receivable from broker that borrowed. That will balance out within the warehouse. Whether that number of shares in the float equals or is larger than the legal number of shares authorized by the company is the critical question. I point that out because that was your original question of where phantom shares can possibly originate from.

You mentioned the DTCC's job and duty. I agree there is a required trust in the DTCC, for the stock market to work. But also consider that the DTCC is like a cooperative. It is comprised of the major prime brokers and market makers. They also directly lend shares out for shorting and charge large fees, not a minor line item for them.