Replies to post #164114 on Medical Marijuana Inc (MJNA)

[Tonone]

How do you tell the difference between shorting and dilution?

[Tonone]

I'm not familiar with these new trading rules?? Can you provide a link - I cant find anything on it.

Thanks

[Det_Robert_Thorne]

"Stock Borrowing" end likely not a big deal

New trading rules no more shorts.

The end of this program may not be a big deal, because according to the article in the Federal Register, the program was being used less and less, and is being stopped because it's "not economically efficient to maintain".

Here's how the program is described in the Federal Register [Emphasis Added]:

Currently, NSCC Members may elect to participate in the Stock Borrow Program by designating specific securities from their inventory at the Depository Trust Company (“DTC”) as available to be lent in the event that NSCC's Continuous Net Settlement (“CNS”) system cannot complete a delivery of a security to a long Member because a short Member has not completed its delivery to CNS. In such a case, if a lender has identified such a security as available through the Stock Borrow Program and the lender has a free excess position of the security at DTC, NSCC initiates deliveries through CNS to the long Member and sets up a pending receive for the lending Member. If the position is not returned to the lender by the end of the settlement day, i.e., the Member with the original obligation to deliver to CNS does not complete that delivery, the lender receives full market value for the securities through NSCC settlement.

Usage of NSCC's Stock Borrow Program has declined over the past few years. In 2007, NSCC borrowed a daily average of approximately $1.85 billion in market value at the close of each day from the approximately 21 Members that participated in the Stock Borrow Program. In October 2013, only three Members participated in the Stock Borrow Program and the average daily value borrowed at the close of day during that month was approximately $81 million. Usage of the program has continued to drop since the end of October 2013. Given the reduction in the use of the program, NSCC has determined that it is not economically efficient to maintain the service.

My guess is that the overall market has become more efficient via the Electronic Communications Networks (ECNs), and because the members can quickly get their hands on shares from multiple sources, the need for this "borrowing program" has diminished.

That's why we're not seeing Failures to Deliver very often.