Posted On: 08/27/2015 3:49:16 PM
Post# of 96881
Re: 2015invest #29467
They are valid and tradeable. The system requires the shorts to cover. The system requires the brokerages to force shorts to cover. The system requires brokers to know that the client that is shorting has assets they can force sell to recover their funds at risk. No matter what the price, shorts are supposed to be forced to buy back enough shares to deliver.
No Matter What the Price = Short squeeze and big losses
No Matter What the Price = Pressure throughout the system to make sure that shorts can stand by their commitments
If the Brokerage itself did a poor job of underwriting its customers, then the brokerage goes BK to cover its debts and the risk steps up to the Prime Brokerage that clears their trades. Now we get to Too Big Too Fail.
The problem is that the system isnt perfect and it does break. From our point of view, each individual shareholder retains the value of the shares they bought, but the system may be forced to cover using some sort of E&O or system wide insurance policy or guarantee fund or fraud fund.
Paul
No Matter What the Price = Short squeeze and big losses
No Matter What the Price = Pressure throughout the system to make sure that shorts can stand by their commitments
If the Brokerage itself did a poor job of underwriting its customers, then the brokerage goes BK to cover its debts and the risk steps up to the Prime Brokerage that clears their trades. Now we get to Too Big Too Fail.
The problem is that the system isnt perfect and it does break. From our point of view, each individual shareholder retains the value of the shares they bought, but the system may be forced to cover using some sort of E&O or system wide insurance policy or guarantee fund or fraud fund.
Paul
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