New Report: Illegal Naked Short Selling is Legal for Citadel
That’s right, the illegal practice of selling shares that have not been determined to exist, otherwise known as ‘naked short selling‘, is legal for Ken Griffin’s Citadel as well as other market makers.
Yahoo’s Senior Markets and Data reporter Jared Blikre says most of the time it’s illegal.
“If a hedge fund releases a short report on a stock, they can short it, but they have to pay a borrowing fee.
They have to borrow it from somebody so they don’t engage in naked short selling, which increases the amount of shares and the float of the company.
Now market makers like those at the New York Stock Exchange– Citadel is one. They can engage in naked short selling, and it’s perfectly legal. It’s part of their market-making duties to provide liquidity for a stock,” reports Blikre.
“Sometimes there are fails to deliver, and a fail to deliver is when you don’t have the ability to prove that you borrowed the stock legally before you actually shorted it,” he continued.
“The wholesalers are providing infinite liquidity, so if we get an order for a thousand shares in stock that no one has ever heard of and there’s two hundred shares in Nasdaq and New York, we fill at a thousand shares at that inside price. That’s meaningful liquidity,” said Virtu Financial CEO Doug Cifu last year.
But it’s not meaningful liquidity, these shares simply don’t exist.
This is how a demand for short sales that have not been determined to exist have the power to tank the markets or how small to mid-cap size businesses become targets of manipulative short selling.
If illegal naked short selling can become legal for market makers such as Citadel and Virtu, are the markets rigged?
Market Makers and Halts
Patrick McConlogue, an ex-Citadel Data Scientist appeared on Fox Business during the ‘meme stock’ frenzy of 2021 when retail investors created one of the biggest scares in Wall Street history.
GameStop and AMC shareholders were able to create panic on Wall Street by heavily buying shares of the overleveraged shorted stocks.
As share prices soared, short sellers experienced massive losses.
GameStop was able to put Melvin Capital out of business, but Patrick McConlogue says other hedge funds were able to make back billions in losses during the halt.
The halts allowed hedge funds to enter AMC and GameStop knowing shares would plummet, allowing them to capitalize on the deflation of the price.
Patrick says the rules of the game also heavily favor hedge funds, something retail investors have urged SEC Chairman Gary Gensler for years to change.
“The game is not fair and it never has been. Individual investors, even when operating in a swarm, are destined to lose. How do I know? I helped design the game,” says McConlogue.
“I respect many of my colleagues, the problem isn’t the people, it’s the rules of the game which heavily favor the funds,” he continued.
Could ‘naked short selling’ explain why certain stocks trade sideways despite heavy buying volume?
Or perhaps why certain stocks seem to continuously get beat down to the ground despite positive fundamental developments?
I’d love to hear your thoughts on this — leave a comment down below.
Market News Published Daily 📰
Join the newsletter ⬅️ to receive daily stock market news, business news and updates straight to your inbox; more than 10,000 readers have joined!
THANK YOU to all of our blog sponsors, this year we’ve been able to increase our email sends and signup slots as well as introduce push notifications.
Franknez.com is the media site that keeps retail investors informed.
You can also follow Frank Nez on Twitter, Instagram, Facebook, or LinkedIn for daily news and updates on your favorite stories.
Become a Sponsor for only $1/mo.
- Gain access to EXCLUSIVE FrankNez articles you won’t find here.
- Become part of a private and safe Discord community, just for retail investors.
- Get drawn at the end of the year for holiday giveaways.
Recommended For You ✨
-
-
-
-
-
-
-
-
-
-
Show CommentsThe Chief of Mullen is still doing his old tricks.Grab a bunch of Mullen stock and sell it right now. He has been lining his pockets and the investors keep getting knocked down. Not a lot of honesty there.
🤔
Do you believe the lawsuit that Northwest biotherapeutics has brought against them will have an impact on there future activities?
Fucking clowns
I think we already know the answers to these questions. Mark Cohodes stated a while back that market makers are the only ones who can create synthetics. While I think there’s some merit to it my question is where does it end? Are they able to create infinite shares regardless of the float size?
Leave your thoughts below.
Please write about Mmtlp ! If this is resolved you will be an American hero !
I’ve written MANY articles about MMTLP! Look them up
So, could retail organize and submit a bunch of buy orders in AMC, and if market makers do not supply that infinite liquidity but will for other hedge funds or institutional investors, could that represent an unfair and biased use of market maker exemptions, with legal merit to sue or hold them financially responsible through the courts? As well as, regulators that are complicit? There are many of us retail that are looking for ways to deter and hold those accountable that rig our free and fair markets.
reg sho clearly states a time when the books must get balanced back. they are not doing it.