How the SEC tricks you
FINRA Short Sale Daily Volumes data, for example, can create a false impression of overall short selling activity in individual securities. some market participants mistakenly conclude that the bimonthly short interest data is understated because the Short Sale Daily Volume File reflects volume that is much larger than the positions reported as short interest. However, short interest position data does not equate to the daily short sale volume data posted on FINRA’s website.
Short Sale Daily Volume File only includes trades that are published to the public, not the offsetting trades that are reported to FINRA for regulatory oversight and/or clearing. There are two types of market activity in short sales: directional investor orders and temporal market making. Directional orders represent investors selling borrowed shares in the hope of buying them back at cheaper price. Temporal short sales take place when a regulated broker-dealer engages in market making activity as a dealer by providing liquidity in the form of bids and offers that allow other investors to immediately buy or sell.
The market maker continues to provide bids and offers throughout the day and its position fluctuates between long and short – and often goes back and forth many times in a single day – as investors interact with its quotes. Market makers work on whats called bona fide market making. If a market maker is representing an investor’s long sell order in their displayed quote (otherwise known as Limit Order Display), the public media report trade will show up as a short sale, and the long sale will be a regulatory non-media report. In the above situations, trades initiated by a natural buyer or a long seller, the media trade reports will be marked as short sales. This further creates confusion about short activity in the market.
The Manning obligation, requires that market makers immediately fill all live marketable customer orders at the same or better price, before allocating trades to a market maker’s own account. Depending on the market maker’s position in that moment, sell orders may be reported as “media” short sales to the public when the regulatory non-media trade report is a regular long sale.
FINRA Short Sale Daily Volume File conflates directional investors short selling with market maker short selling activity into one confusing number. This method of publication causes the aggregate volume to appear to reflect a higher concentration of directional short sale activity than is occurring.
Stocks that look ready to run from short selling:
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
Read more
Comment
Sign in to post a comment
AllSeeingGuy : Great... So, they just pick a high volume stock and play with it like Play-Doh and FINRA's gettin' a slice. Pathetic bastards. Does the retail stand a chance. No. Why would they?
This is why I follow you, Broseph. Great data and TRUTH. Can't find that anywhere else tbh. Appreciate you...
Mcsnacks H TupackOP AllSeeingGuy: The SEC and FINRA choose what they want the public to know and it's nothing that will help them. But the market makers know which are the hedge funds.
Trytosaveabit : Great information! So will any of this change when the new rule actually goes into effect/need to be compliant buy, in about 16 months yet I think? Where actual totals of all short sales have to reported daily to SEC? Or will this new rule essentially change nothing? But the action of taking the vote and passing it. Was just to make it look to retail that SEC was actually trying to do something to bring more transparency? Have a great weekend
Mcsnacks H TupackOP Trytosaveabit: Nothing will change for the investors. They have always gotten the information. They don't break it down into what is what tho and release it until it's useless. Like they will wait until the 15th or 30th when too much time has passed. We will never have an advantage.
Henry Leong : Looking good. Bullish with good news to come