4 ms·

In reference to the GME/WSB fiasco the issue isn't so much the shorting itself but the large number of “fails-to-deliver”. This was happening since early Decem

In reference to the GME/WSB fiasco the issue isn't so much the shorting itself but the large number of “fails-to-deliver”. This was happening since early December. It looked suspicious and was reported to the SEC. Read comments for receipts. https://www.reddit.com/r/wallstreetbets/comments/kr98ym/gme_gang_we_need_to_complain_about_naked_short/?utm_source=share&utm_medium=ios_app&utm_name=iossmf https://www.reddit.com/r/wallstreetbets/comments/kr98ym/gme_...

ZephyrBlu 6y ago
Which I believe is due to them having shorted over 100% of the float making it impossible for the shares which were shorted to be purchased.
- wrkronmiller 6y ago
  > There are 100 shares. A owns 90 of them, B owns 10. A lends her 90 shares to C, who shorts them all to D. Now A owns 90 shares, B owns 10 and D owns 90—there are 100 shares outstanding, but190 shares show up on ownership lists. (The accounts balance because C owes 90 shares to A, giving C, in a sense, negative 90 shares.) Short interest is 90 shares out of 100 outstanding. Now D lends her 90 shares to E, who shorts them all to F. Now A owns 90, B 10, D 90 and F 90, for a total of 280 shares. Short interest is 180 shares out of 100 outstanding. No problem! No big deal! You can just keep re-borrowing the shares. F can lend them to G! It's fine. https://www.bloomberg.com/opinion/articles/2021-01-25/the-game-never-stops?sref=1kJVNqnU#footnote-3 https://www.bloomberg.com/opinion/articles/2021-01-25/the-ga...
  - pbronez 6y ago
    “It’s fine” This situation sounds like a hideous volatile time bomb of complex exponential effects.
    - vsareto 6y ago
      That's a bit overblown. Dog piling into a single stock is one thing. An entire market (that was) primed to collapse (housing) is another.
      - rtx 6y ago
        As said in another comment, these thing can easily slowball due to leveraged positions.
  - ZephyrBlu 6y ago
    This seems like textbook naked shorting. "Ordinarily, traders must borrow a stock, or determine that it can be borrowed, before they sell it short. So naked shorting refers to short pressure on a stock that may be larger than the tradable shares in the market" https://www.investopedia.com/terms/n/nakedshorting.asp https://www.investopedia.com/terms/n/nakedshorting.asp

ZephyrBlu 6y ago

Which I believe is due to them having shorted over 100% of the float making it impossible for the shares which were shorted to be purchased.

wrkronmiller 6y ago
> There are 100 shares. A owns 90 of them, B owns 10. A lends her 90 shares to C, who shorts them all to D. Now A owns 90 shares, B owns 10 and D owns 90—there are 100 shares outstanding, but190 shares show up on ownership lists. (The accounts balance because C owes 90 shares to A, giving C, in a sense, negative 90 shares.) Short interest is 90 shares out of 100 outstanding. Now D lends her 90 shares to E, who shorts them all to F. Now A owns 90, B 10, D 90 and F 90, for a total of 280 shares. Short interest is 180 shares out of 100 outstanding. No problem! No big deal! You can just keep re-borrowing the shares. F can lend them to G! It's fine. https://www.bloomberg.com/opinion/articles/2021-01-25/the-game-never-stops?sref=1kJVNqnU#footnote-3 https://www.bloomberg.com/opinion/articles/2021-01-25/the-ga...
- pbronez 6y ago
  “It’s fine” This situation sounds like a hideous volatile time bomb of complex exponential effects.
  - vsareto 6y ago
    That's a bit overblown. Dog piling into a single stock is one thing. An entire market (that was) primed to collapse (housing) is another.
    - rtx 6y ago
      As said in another comment, these thing can easily slowball due to leveraged positions.
- ZephyrBlu 6y ago
  This seems like textbook naked shorting. "Ordinarily, traders must borrow a stock, or determine that it can be borrowed, before they sell it short. So naked shorting refers to short pressure on a stock that may be larger than the tradable shares in the market" https://www.investopedia.com/terms/n/nakedshorting.asp https://www.investopedia.com/terms/n/nakedshorting.asp