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Replies to post #24218 on Raystream Inc.(fka RAYS)
09/19/13 12:54 PM
One of the primary functions of broker-dealers is to act as intermediaries for
investors that are buying or selling stock. Often, to carry out that function, broker-
dealers will handle such investor orders on a riskless principal basis. A riskless sale
is one in which a broker-dealer, after having received an order to sell a security, sells
the security as principal, at the same price, to satisfy that order. Regulations require
broker-dealers to mark their proprietary riskless sell order as short if they don't own
the security, even if the customer order to sell the security is long. Since broker-
dealers generally don’t maintain a position, a significant number of such riskless
sales are reported as short, even though the customer is selling long, and the
broker-dealer intends to and will buy the shares from the long selling customer
immediately after the proprietary riskless short sale takes place. Typically, the
broker-dealer's position is short for considerably less than one second.
AI
