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Speaking as a long term value investor who is mostly noshing po'corn and watching, I have a couple of questions: Don't the settlement worries provide evidence
by mcguire 6y ago
Speaking as a long term value investor who is mostly noshing po'corn and watching, I have a couple of questions:
Don't the settlement worries provide evidence of naked shorts? (Naked shorts being selling a share without being sure the share would be available at settlement? And naked shorts illegal?)
Wouldn't the normal procedure be to halt all trading until the issues had cleared up? As opposed to allowing positions to be closed, but not opened?
- seabird 6y agoNaked shorts are not impossible, especially if you're talking about naked call options. They're comparatively rare (being illegal just means you get fined if you get caught, it's really "not that serious" for a big player), and small timers aren't allowed to participate, but they're not impossible. An even bigger point than that is that the short doesn't necessarily have to be naked in the legal sense for you to fail to deliver, especially when a security has gone completely Texas like GME has. This situation is rare. Halting all trades is very scary for all parties involved. It's way worse for just about everybody than asking brokerages to have 100% collateral is.
- mcguire 6y agoBut halting trading is not entirely uncommon. It's what happens when weird stuff is going on. I've never heard of preventing opening new positions while allowing positions to be closed.
- seabird 6y agoHalting trading temporarily is extremely common. A halt for hours or days at a time is not.