4 ms·

This is why eShares or someone like them will disrupt this entire ecosystem. ComputerShares should be killed off too. The entire system is amazingly broken.

by davidu 10y ago

toomuchtodo 10y ago
Just like BankSimple/Simple was going to crush banking. You underestimate the power of monolithic financial organisms. What they lack in agility, they make up for in resources and sheer brute force.
- publicfig 10y ago
  I should start by saying that I agree with your response to the above statement, but would add that while Simple/similar services may not have crushed the banking institutions, they definitely did bring forward a lot of technologies over the past few years that have now become absolutely expected from a bank, which was not the case before services like them came around. Now this could just as much be contributed to natural development of the banks that happened alongside these new banks, but it could be a similar case that where these newer stock solutions may not crush the existing players, they may force the hand of a lot of technological innovation that we may not see otherwise.
cma 10y ago
Voting rights aren't even accurately tracked. People who buy non-existent shares from naked shorters get voting rights. Not too many people can naked short anymore, but I think voting rights also come along when you buy from people who shorted with borrowed shares, yet the people who lended the shares still get voting rights too.
- quantumhobbit 10y ago
  This is what bothers me. What stops someone from shorting and then buying the shares (likely through an intermediary) in order to gain votes. Seems like it would be enough to tip the vote in a close shareholder vote. I don't think there is anything like a negative vote to balance it out as with negative shares and dividends.
  - sigstoat 10y ago
    > What stops someone from shorting and then buying the shares (likely through an intermediary) in order to gain votes. i don't think anything stops you, but you're going to eat the whole bid/ask spread when you're acquiring these extra shares, then again when you exit the position, plus margin maintenance costs. your plan also assumes that your broker will let you get out the entire proceeds of a unclosed short sale fast enough to get them over to another broker to buy more shares before the market can really move on you. if your broker will even let you short whatever number of shares you want to do this with, they'll probably just lend you the cash to go long that many shares. which would be a lot easier.
  - logfromblammo 10y ago
    It is very likely that the people who know they are casting a negative vote will vote strategically for the opposite of the thing they actually want to happen, thus turning their negative vote into an anti-negative vote. I don't think that is resolvable unless each vote has an intrinsic auction process wherein each vote is accompanied by a dollar-valued bid, which is what it would cost for you to not vote your shares on that issue. The costs are ordered, and the cost of the lowest N votes are sold to the N anti-shares of open short positions, and so each short pays 1/N of the total cost. Any vote not cast or cast-by-proxy or explicitly cast as "abstain" is intrinsically a $0 bid for not-voting that share. So if there are 10000 real shares in circulation, and 4000 shadow shares, and 4000 shadow anti-shares, then 14000 shares are eligible to vote, but the shadow anti-share holders are also on the hook for collectively buying off the proxy for the 4000 least-interested shareholders, and not-voting those shares. If 2000 people don't vote or fail to assign their proxy, and the next-lowest 2000 bids amount to $80, then each short pays $0.02 per shorted share, and the brokers distribute that to all the low bidders, including those who didn't vote or assign proxy.
- vpribish 10y ago
  voting rights are certainly tracked - there absolutely are a known number of shares and owners of them. Now, because of trading activity, settlement, lending, failing-to-deliver those shares might not yet be recorded as belonging to the people who think they own them! shorting does not create new shares in the accounts at the DTC - it does create hypothetical entries in the accounts of the broker's clients. The lender does not get a vote while their share is lent out! The last person in the chain of re-hypothecated shares will eventually (usually after 3 days) be the one true owner of the one true share and has the vote. there are some special cases that ordinary investors will not encounter where you can actually split the voting rights from the other aspects of the share and lend the share out but keep the vote - but in this case, of course, the borrower can't vote. This sort of thing is administrated by the brokers - and is kind of like what happened in the article where the brokers sort it out among themselves how to reconcile the official record to the client's account states.
  - cma 10y ago
    I had a bloomberg article about it bookmarked but the link rotted: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a4OuCsU8r2Yg http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a4OuC... The title was: "Double Voting in Proxy Contests Threatens Shareholder Democracy - Bloomberg"
    - vpribish 10y ago
      That article is really hard to find - no luck! It was written by Bob Drummond for Bloomberg Feb 27, 2006. He is still active and was writing a lot of articles on naked shorting at the time. fwiw

This is why eShares or someone like them will disrupt this entire ecosystem. ComputerShares should be killed off too. The entire system is amazingly broken.

by davidu 10y ago

This is why eShares or someone like them will disrupt this entire ecosystem. ComputerShares should be killed off too. The entire system is amazingly broken.

toomuchtodo 10y ago

Just like BankSimple/Simple was going to crush banking. You underestimate the power of monolithic financial organisms. What they lack in agility, they make up for in resources and sheer brute force.

publicfig 10y ago
I should start by saying that I agree with your response to the above statement, but would add that while Simple/similar services may not have crushed the banking institutions, they definitely did bring forward a lot of technologies over the past few years that have now become absolutely expected from a bank, which was not the case before services like them came around. Now this could just as much be contributed to natural development of the banks that happened alongside these new banks, but it could be a similar case that where these newer stock solutions may not crush the existing players, they may force the hand of a lot of technological innovation that we may not see otherwise.

cma 10y ago

Voting rights aren't even accurately tracked. People who buy non-existent shares from naked shorters get voting rights. Not too many people can naked short anymore, but I think voting rights also come along when you buy from people who shorted with borrowed shares, yet the people who lended the shares still get voting rights too.

quantumhobbit 10y ago
This is what bothers me. What stops someone from shorting and then buying the shares (likely through an intermediary) in order to gain votes. Seems like it would be enough to tip the vote in a close shareholder vote. I don't think there is anything like a negative vote to balance it out as with negative shares and dividends.
- sigstoat 10y ago
  > What stops someone from shorting and then buying the shares (likely through an intermediary) in order to gain votes. i don't think anything stops you, but you're going to eat the whole bid/ask spread when you're acquiring these extra shares, then again when you exit the position, plus margin maintenance costs. your plan also assumes that your broker will let you get out the entire proceeds of a unclosed short sale fast enough to get them over to another broker to buy more shares before the market can really move on you. if your broker will even let you short whatever number of shares you want to do this with, they'll probably just lend you the cash to go long that many shares. which would be a lot easier.
- logfromblammo 10y ago
  It is very likely that the people who know they are casting a negative vote will vote strategically for the opposite of the thing they actually want to happen, thus turning their negative vote into an anti-negative vote. I don't think that is resolvable unless each vote has an intrinsic auction process wherein each vote is accompanied by a dollar-valued bid, which is what it would cost for you to not vote your shares on that issue. The costs are ordered, and the cost of the lowest N votes are sold to the N anti-shares of open short positions, and so each short pays 1/N of the total cost. Any vote not cast or cast-by-proxy or explicitly cast as "abstain" is intrinsically a $0 bid for not-voting that share. So if there are 10000 real shares in circulation, and 4000 shadow shares, and 4000 shadow anti-shares, then 14000 shares are eligible to vote, but the shadow anti-share holders are also on the hook for collectively buying off the proxy for the 4000 least-interested shareholders, and not-voting those shares. If 2000 people don't vote or fail to assign their proxy, and the next-lowest 2000 bids amount to $80, then each short pays $0.02 per shorted share, and the brokers distribute that to all the low bidders, including those who didn't vote or assign proxy.
vpribish 10y ago
voting rights are certainly tracked - there absolutely are a known number of shares and owners of them. Now, because of trading activity, settlement, lending, failing-to-deliver those shares might not yet be recorded as belonging to the people who think they own them! shorting does not create new shares in the accounts at the DTC - it does create hypothetical entries in the accounts of the broker's clients. The lender does not get a vote while their share is lent out! The last person in the chain of re-hypothecated shares will eventually (usually after 3 days) be the one true owner of the one true share and has the vote. there are some special cases that ordinary investors will not encounter where you can actually split the voting rights from the other aspects of the share and lend the share out but keep the vote - but in this case, of course, the borrower can't vote. This sort of thing is administrated by the brokers - and is kind of like what happened in the article where the brokers sort it out among themselves how to reconcile the official record to the client's account states.
- cma 10y ago
  I had a bloomberg article about it bookmarked but the link rotted: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a4OuCsU8r2Yg http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a4OuC... The title was: "Double Voting in Proxy Contests Threatens Shareholder Democracy - Bloomberg"
  - vpribish 10y ago
    That article is really hard to find - no luck! It was written by Bob Drummond for Bloomberg Feb 27, 2006. He is still active and was writing a lot of articles on naked shorting at the time. fwiw