More info detailing the Reg SHO daily short sale t
Post# of 11899
Posted On: 01/29/2014 1:52:45 AM
More info detailing the Reg SHO daily short sale transactions and reporting could prove useful to some investors, if they care to know or are curious to know .
First of all, it is important to look at the column names for the daily short sale data from FINRA. Notice the very next column after (to the right of) the "Short Volume" is the "Short Exempt Volume".
http://regsho.finra.org/FORFshvol20140128.txt
Date|Symbol| ShortVolume | Short Exempt Volume |TotalVolume|Market
20140128|RFMK|118529713| 0 |351540990|O
20140127|RFMK|139774147| 0 |284503783|O
Note that for ALL OTC securities, the value in the "Short Exempt Volume" column is ZERO. Why? Because for
OTC securities market makers are not required to mark positions as "short exempt", but they are still required to report the daily short sale transactions.
http://www.sec.gov/divisions/marketreg/mrfaqregsho1204.htm
"Question 2.1: Should a broker or dealer mark a short sale order “short exempt” if the order involves an OTCBB stock?
Answer: Rule 200(g)(2) provides that a short sale shall be marked “short exempt” if the seller is relying on an exception from the tick test of Rule 10a-1 or any short sale price test of any SRO. Securities traded on the over-the-counter bulletin board (“OTCBB”) are not subject to any short sale price tests and are therefore do not rely on an exception from such price tests. As such, they need not be marked “short exempt.” Short sales in such securities may continue to be marked “short.”
...
" Regulation SHO includes an exception from the locate requirement, in Rule 203(b)(3)(iii), for short sales effected by market makers in connection with bona-fide market making activities. "
http://www.finra.org/Industry/Compliance/Mark.../index.htm
"The Daily Short Sale Volume Files provide aggregated volume by security on all short sale trades executed and reported to a FINRA reporting facility during normal market hours."
http://www.investopedia.com/terms/s/shortexempt.asp
"Definition of 'Short Exempt'
A short sale order in which the uptick rule doesn't apply to the trade. The trade can go through on a down tick, or a downward move in price, where a traditional short order trade has to be done on an uptick, or upward move in price.
Investopedia explains 'Short Exempt'
Any order that goes through needs to be marked long, short or short exempt, with short and short exempt being marked with SSH and SSE, respectively. The uptick rule is in place to prevent short sellers from unduly putting downward pressure on a stock with heavy selling volume."
For stocks trading on the Nasdaq, there exists a requirement to mark shares "short exempt" which have been shorted because of bona fide market making activity. Though when you look at the daily figures for Nasdaq stocks, you will observe that for nearly all of the Nasdaq stocks, this number is typically ZERO .
There are a rare few every other day which have some non-zero value for the "short exempt" shares involved in transactions on that day. This means that for the most part, market makers primarily use their own inventory of shares on hand to fulfill orders and it is very rare for them to run out of shares and need to naked short a client's buy order to fulfill the order, followed by sometime during the T+3 settlement duration go into the market and find real shares to deliver and cover the short sale. The idea that this is a necessary mechanism by which ALL or most of the shares on exchanges are transacted by market makers each day is a FANTASY , a delusion of some who rely on fellow basher's posts who also may very well not know of what they speak and erroneously take the collective mindless dribble as gospel. Let us see a few recent FINRA daily reports for a few major stocks on the NASD which had non-zero "short exempt" figures; note how small the total number of " short exempt " shares were versus the total "short" sales and total volume.
20140128| AAPL |591526| 440 |2659856|N
20140128|AEM|59489| 1300 |108490|N
20140128|IYR|55880| 1900 |110603|N
20140128|RSOL|93642| 100 |246076|N
20140128|TTM|23654| 300 |51267|N
20140128|VNQ|74687| 400 |103738|N
Some more info can be found at the links below :
http://finra.complinet.com/en/display/display...nt_id=3030
"The NASD's short sale rule (Short Sale Rule or Rule 5100) generally prohibits members from effecting short sales in NGM securities at or below the inside bid when the current inside bid is below the previous inside bid.] Rule 6130(d)(6) requires that members indicate on System reports whether a transaction is a short sale]or a short sale exempt] transaction ("short sale reporting requirements"). Rule 6130 explicitly requires members to file reports [not just for NGM securities transactions, but] for [other securities] transactions in all Reportable Securities, including transactions in exchange-listed, [Capital Market,] convertible debt, OTC Bulletin Board, and OTC equity securities. Thus, all short sale transactions in these securities reported to the System must carry a "short sale" indicator [( or a "short sale exempt " indicator if it is a short sale transaction in an NGM or exchange-listed security that qualifies for an exemption from Rule 5100 or SEC Rule 10a-1)"
http://www.sec.gov/rules/concept/34-42037.htm
" Certain trading strategies have developed that may be used to avoid the restrictions of the short sale rule . T raders employing such strategies enter arrangements with a counterparty to create a position in an equity security that technically is long, but gives the traders no real economic stake in the equity security. Typically, these strategies rely on the provision of Rule 3b-3 that provides that a person has a long position in a security if he has "entered into an unconditional contract, binding on both parties thereto, to purchase [the stock] but has not yet received it."66 Often, these strategies involve the creation of a married put prior to, or simultaneous with, a sale of the stock.67 Soon after creating this arrangement (i.e., later in the day), it is unwound when the market participant purchases shares to return to the counterparty.
A potential for abuse exists where the trader aggressively sells the "long" stock position, destabilizing the price of the stock , and soon after repurchases the stock in the market to return to the counterparty. This type of strategy may present a heightened potential for manipulation . While there are legitimate reasons to engage in married puts (or other similar arrangements), we are concerned that they may be used for improper purposes .
Q34. Please describe examples of any manipulative strategies that exploit the current definition of "short sale," and whether regulatory measures should be adopted to combat such strategies.
G. Extending the Short Sale Rule to Non-Exchange Listed Securities
Current short sale regulations cover securities that are either listed on an exchange or traded in the Nasdaq NMS. As a result, they cover securities that are generally characterized by high trading liquidity. In addition, these markets have a relatively high degree of transparency. Securities traded in the OTC markets (e.g., Nasdaq Small Cap, the NASD's OTCBB, the Pink Sheets) are not subject to short sale restrictions . The staff frequently receives complaints alleging short sale abuses involving securities in the OTC markets . "
Hope this helps...
Do or do not, there is no try.
$RFMK
First of all, it is important to look at the column names for the daily short sale data from FINRA. Notice the very next column after (to the right of) the "Short Volume" is the "Short Exempt Volume".
http://regsho.finra.org/FORFshvol20140128.txt
Date|Symbol| ShortVolume | Short Exempt Volume |TotalVolume|Market
20140128|RFMK|118529713| 0 |351540990|O
20140127|RFMK|139774147| 0 |284503783|O
Note that for ALL OTC securities, the value in the "Short Exempt Volume" column is ZERO. Why? Because for
OTC securities market makers are not required to mark positions as "short exempt", but they are still required to report the daily short sale transactions.
http://www.sec.gov/divisions/marketreg/mrfaqregsho1204.htm
"Question 2.1: Should a broker or dealer mark a short sale order “short exempt” if the order involves an OTCBB stock?
Answer: Rule 200(g)(2) provides that a short sale shall be marked “short exempt” if the seller is relying on an exception from the tick test of Rule 10a-1 or any short sale price test of any SRO. Securities traded on the over-the-counter bulletin board (“OTCBB”) are not subject to any short sale price tests and are therefore do not rely on an exception from such price tests. As such, they need not be marked “short exempt.” Short sales in such securities may continue to be marked “short.”
...
" Regulation SHO includes an exception from the locate requirement, in Rule 203(b)(3)(iii), for short sales effected by market makers in connection with bona-fide market making activities. "
http://www.finra.org/Industry/Compliance/Mark.../index.htm
"The Daily Short Sale Volume Files provide aggregated volume by security on all short sale trades executed and reported to a FINRA reporting facility during normal market hours."
http://www.investopedia.com/terms/s/shortexempt.asp
"Definition of 'Short Exempt'
A short sale order in which the uptick rule doesn't apply to the trade. The trade can go through on a down tick, or a downward move in price, where a traditional short order trade has to be done on an uptick, or upward move in price.
Investopedia explains 'Short Exempt'
Any order that goes through needs to be marked long, short or short exempt, with short and short exempt being marked with SSH and SSE, respectively. The uptick rule is in place to prevent short sellers from unduly putting downward pressure on a stock with heavy selling volume."
For stocks trading on the Nasdaq, there exists a requirement to mark shares "short exempt" which have been shorted because of bona fide market making activity. Though when you look at the daily figures for Nasdaq stocks, you will observe that for nearly all of the Nasdaq stocks, this number is typically ZERO .
There are a rare few every other day which have some non-zero value for the "short exempt" shares involved in transactions on that day. This means that for the most part, market makers primarily use their own inventory of shares on hand to fulfill orders and it is very rare for them to run out of shares and need to naked short a client's buy order to fulfill the order, followed by sometime during the T+3 settlement duration go into the market and find real shares to deliver and cover the short sale. The idea that this is a necessary mechanism by which ALL or most of the shares on exchanges are transacted by market makers each day is a FANTASY , a delusion of some who rely on fellow basher's posts who also may very well not know of what they speak and erroneously take the collective mindless dribble as gospel. Let us see a few recent FINRA daily reports for a few major stocks on the NASD which had non-zero "short exempt" figures; note how small the total number of " short exempt " shares were versus the total "short" sales and total volume.
20140128| AAPL |591526| 440 |2659856|N
20140128|AEM|59489| 1300 |108490|N
20140128|IYR|55880| 1900 |110603|N
20140128|RSOL|93642| 100 |246076|N
20140128|TTM|23654| 300 |51267|N
20140128|VNQ|74687| 400 |103738|N
Some more info can be found at the links below :
http://finra.complinet.com/en/display/display...nt_id=3030
"The NASD's short sale rule (Short Sale Rule or Rule 5100) generally prohibits members from effecting short sales in NGM securities at or below the inside bid when the current inside bid is below the previous inside bid.] Rule 6130(d)(6) requires that members indicate on System reports whether a transaction is a short sale]or a short sale exempt] transaction ("short sale reporting requirements"). Rule 6130 explicitly requires members to file reports [not just for NGM securities transactions, but] for [other securities] transactions in all Reportable Securities, including transactions in exchange-listed, [Capital Market,] convertible debt, OTC Bulletin Board, and OTC equity securities. Thus, all short sale transactions in these securities reported to the System must carry a "short sale" indicator [( or a "short sale exempt " indicator if it is a short sale transaction in an NGM or exchange-listed security that qualifies for an exemption from Rule 5100 or SEC Rule 10a-1)"
http://www.sec.gov/rules/concept/34-42037.htm
" Certain trading strategies have developed that may be used to avoid the restrictions of the short sale rule . T raders employing such strategies enter arrangements with a counterparty to create a position in an equity security that technically is long, but gives the traders no real economic stake in the equity security. Typically, these strategies rely on the provision of Rule 3b-3 that provides that a person has a long position in a security if he has "entered into an unconditional contract, binding on both parties thereto, to purchase [the stock] but has not yet received it."66 Often, these strategies involve the creation of a married put prior to, or simultaneous with, a sale of the stock.67 Soon after creating this arrangement (i.e., later in the day), it is unwound when the market participant purchases shares to return to the counterparty.
A potential for abuse exists where the trader aggressively sells the "long" stock position, destabilizing the price of the stock , and soon after repurchases the stock in the market to return to the counterparty. This type of strategy may present a heightened potential for manipulation . While there are legitimate reasons to engage in married puts (or other similar arrangements), we are concerned that they may be used for improper purposes .
Q34. Please describe examples of any manipulative strategies that exploit the current definition of "short sale," and whether regulatory measures should be adopted to combat such strategies.
G. Extending the Short Sale Rule to Non-Exchange Listed Securities
Current short sale regulations cover securities that are either listed on an exchange or traded in the Nasdaq NMS. As a result, they cover securities that are generally characterized by high trading liquidity. In addition, these markets have a relatively high degree of transparency. Securities traded in the OTC markets (e.g., Nasdaq Small Cap, the NASD's OTCBB, the Pink Sheets) are not subject to short sale restrictions . The staff frequently receives complaints alleging short sale abuses involving securities in the OTC markets . "
Hope this helps...
Do or do not, there is no try.
$RFMK
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