RE: RE: Franjul, are you hurting yet ?
While the information you give from the TSX is interesting, it is misleading and very partial. It only give you the short position on the 15 of the month and the end of the month.
That report does not give any information about open short position between the 1 to the 15th and the 16 to 31th of the month and that is the key. Furthermore, with all the ATS, unscrupulous trades have even more options then ever to hide the true nature of there trades.
As an example, let assume that on the 22nd there is and open of 500k short position on AFA, and then let say that on the 31 the position is covered using ATS, only to be re book on the 1. The report would state that on the 31, the were zero shares short, but yet there was a 500K short position still rolling in the books.
Now why do I believe there are hidden short on the system, simple the ATS trading platform are all base on one simple idea, generate volume. Now in order to generate volume these exchange have build a business model based on high frequency trading, and that is why they pay traders to create that volume.
These traders are know as High Frequency traders. On the big board, there models is simple and may work, but there usefulness is now being questioned. To quote legendary value investor Marvin Schwartz, managing director and senior portfolio manager at Neuberger Berman, told CNBC Thursday.
"These high frequency traders begin the day owning nothing and they end the day owning nothing in terms of common stocks. But during the day they're accounting for between 50 percent and 65 percent of the volume," said Schwartz.
The liquidity that is added to the market is "useless," with "no lasting value," he added. "It consists of orders that are placed and that are quickly retracted. It heavily, heavily consists of front-running."
Now, you have many want that be great hedge funds traders that have decided to import these model to TSX-V listed stock. For these model to even have a small chance of working, you need stock like AFA that have big floats, trade good volumes and have a fundamental story that is harder to understand for the average investor (Ie Marine diamonds).
But still to be able to play, these traders have smaller capital and they need to position themselves on the bid and the ask with passive orders in order to keep there position in the trade book and insure payment for passive trading, and then hope to make the spread, but knowing that they will at least make the passive trading payment.
Problems occur when spike in volume happens, and with tsx-V listed stock that is hard to managed. If the stock goes down fast, traders simply kill the balance of their fictitious orders and dumps their position to generate cash, but on the down side trade, there lost are limited, and once they are out, they do not care about the damage done to the stock.
But the real problems starts when traders are surprised by an upward movement, they find themselves in a very bad position, and they find themselves with two options, A) covered on the way up, knowing that their loss are unlimited, or B) double down on their shorts position by selling aggressively on the bid as soon as the upward movement on the stock start to weaken, and then do everything they can to scare silly retails investors in believing that a story is bogus and that the stock is worthless, so some retails investors will dumps is shares and therefore allow the trader to cover is short at almost not cost, and maybe even a profit, once you take into account the money paid by the exchanges for generating false volume.
Now, once you understand that these are the new rules of the game, and you look at the trading and comment pattern of a stock, you understand that things are not what they seem.
If you go back in May, when AFA issued the sampling results, look at the spike in volume and you will notice that on the 15 report the short position was 500,000 and this a couple of days after the news.
On the news the volume and price went up very quick in the morning to get back to its opening price the same day under pressure by brokers such as Jitney and anonymous. Jitney for one is known for its naked short strategies. Also look at the stockhouse BB, you will notice that during does period, basher were more active...
Now, the same trading patterns happened on last news week. Strangely Wise-Guy and FranJul are only posting in the days after these news event with good market movement, so guess what?
They are probably short and fight to recover and make profits. And guess what? it will all happen between the 15th and 31th so TSX info will not show anything!
Ps, you want another clues that these traders are desperate, look at the patterns of trades done on the ATS, when there is more trading being done on the ATS then on the TSX, then, you know that something is not Normal.