Janice in my short stock trading career, all I would like to see is honest MMs. imo I would not be able to sell you a car that I didnt own. If an MM sells me a share that they dont own, is that not what the MMs are doing?
Janice, for the most part I do agree that MMs are necessary for liquidity and volatility reasons but that still does not negate the fact that naked shorting is a technique used by certian 'entities' to drive stock prices lower in an effort to restrict necessary financing by small public companies and eventually drive them out of business.
For the most part MMs are not the proprietary shorts, in other words they are not using their own capital to collateralize the short, but simply acting as the unknowing intermediary. Those providing the capital are usually hedgefunds located offshore or in Canada who route their orders through complicit broker/dealers. It is the broker/dealers responsibility to make the affirmative determinations as to the availability of the stock to be sold short yet they turn a blind eye as they have a financial incentive of increased order flow to do so.
Badian and Rhino Advisors settled with the U.S. Securities and Exchange Commission for $1 million in February 2003. At the time of the settlement, the SEC said Badian was behind manipulative short sales aimed at shares of software company Sedona Corp. (SDNA), then a NASDAQ (NDAQ) listed company.
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