Replies to post #300308 on Spongetech Delivery Systems, Inc. (fka SPNGQ)

[puppydotcom]

I agree with this thought - the MM are struggling with the grey market and the buys are being reported short until they get the shares and close the trade ..

But it leaves me wondering:
1. Are the trades described above handled the way they are because because of a concern on the MM's part that thin trading in the issue may result in difficulty finding a buyer? Or is it an issue of the right price?
2. In cases where there is not a concern about finding a buyer does the MM make the buy from the original seller immediately, resulting in that sale being one of those represented by the difference between "short volume" and total volume" in the report?
3. Can we assume that a short trade, as we normally understand it, is part of the "short volume" on the report?
4. Are the implications of your "discovery" that the fact that "short volume" tends to be a larger percentage of "total volume" in some issues results to a large degree from liquidity and execution concerns on the part of the market makers rather than actual short sales as we know them?
5. If so, what would explain the same high ratios in large cap stocks where there would presumably be no reason for the market maker not to do the buy himself immediately?

[patchman]

Loan, I held off in responding to see how the purveyors of this information responded to FINRA’s explanation. Unfortunately none had the courage to discuss the response from FINRA despite posting the latest misrepresentations.

1. Are the trades described above handled the way they are because of a concern on the MM's part that thin trading in the issue may result in difficulty finding a buyer? Or is it an issue of the right price?

No. The trades are described this way because this is simply how the market and market making works. It protects the MM’s from holding stock they do not want (holding stock limits their capital) and it protects them from taking a loss.

2. In cases where there is not a concern about finding a buyer does the MM make the buy from the original seller immediately, resulting in that sale being one of those represented by the difference between "short volume" and total volume" in the report?

No. Even in a liquid stock there is no guarantee that if you buy you can sell flat or for profit. If you look at the short interest volume reports published, the short interest volume is high in both liquid and illiquid stocks. From NYSE blue chips to gray pigs.

3. Can we assume that a short trade, as we normally understand it, is part of the "short volume" on the report?

Yes. This short trade would show up in this same tally. If the short is held for any appreciable about of time, it would then show up in the bi-Monthly short interest report as well. That becomes the secondary verifier.

4. Are the implications of your "discovery" that the fact that "short volume" tends to be a larger percentage of "total volume" in some issues results to a large degree from liquidity and execution concerns on the part of the market makers rather than actual short sales as we know them?

No. Like I said earlier, The short volume percentage is nearly as high in NASDAQ and NYSE as in OTCBB. Specialists would trade that way as would NASDAQ MM’s. The reason NYSE and NASDAQ may be lower other than that would be the NASDAQ and NYSE use more direct routing trades vs. routed trades through specialists and MM’s.

5. If so, what would explain the same high ratios in large cap stocks where there would presumably be no reason for the market maker not to do the buy himself immediately?

There are no guarantees on any market and because that Specialists and MM’s will work this way because they can and it costs them no money. If you had the option of executing an order with guaranteed protection vs. unguaranteed protection which option would you take if the cost's were the same? The law allows them this option so why not take it?


I hope this helps. This is the type DD that is necessary when using and presenting this type data. To present data as meaning something it doesn’t you leave the potential to harm investors. People were buying up this stock because of false perceptions regarding the level of shorting taking place in SPNG. Because of the way it was presented investors were ignoring the fact that these shorts were not showing up as FTD’s or as short interests in the bi-monthly reports. To address this data it only took a quick call to FINRA and the right questions asked.

SPNG is not a heavily shorted stock or a massively naked short stock. PIKE picked up a majority of the February short interest volume and yet the trades to PIKE did not show up on the FTD list or on the bi-monthly short interest report. These reports are the check and balances to the system and can not be ignored.