No that's not the reason. Its risk. Pennies risk is too high but that doesn't stop them from shorting pennies where the risk is in their favor. In the United States Funds can short pennies. They are suppose to borrow the stock before they short them, Thus enter the naked shorts. When they short a stock they have a time frame to cover. To avoid covering they trade among other funds just before reporting so they never have to report. They can keep this going on a continual basis, usually between 3 or so funds.
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