Hunt for £100m rogue trader after attack on HBOS share price

[bogeyman]

I bookmarked this thread for future reference.

Zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz

[ASB]

Er, yes. In fact they never own them, otherwise they wouldn't be shorting, they would be selling!

(for those that know about these thing: yes it's more complicated than that, but we are dealing with a simpleton here)

You could explain something for me.

does an institution have to borrow the stock (i.e. get somebody to pledge it so they can but it in if need be) before selling ?

If not then what is to stop somebody short selling billions of XYZ plc (far in excess of those in circulation) [Obviously they could get into a spot of bother trying to buy them in to deliver at settlement]

[BrilloPad]

You could explain something for me.

does an institution have to borrow the stock (i.e. get somebody to pledge it so they can but it in if need be) before selling ?

If not then what is to stop somebody short selling billions of XYZ plc (far in excess of those in circulation) [Obviously they could get into a spot of bother trying to buy them in to deliver at settlement]

They have to get them by delivery date.

I remember a case where there was a new issue of bonds and the market shorted more than 100% of the bonds being issued! The issue was pulled and several got burnt fingers.

[BrilloPad]

Zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz

Isn't that the squirrel's mating call?

[bored]

You could explain something for me.

does an institution have to borrow the stock (i.e. get somebody to pledge it so they can but it in if need be) before selling ?

If not then what is to stop somebody short selling billions of XYZ plc (far in excess of those in circulation) [Obviously they could get into a spot of bother trying to buy them in to deliver at settlement]

http://en.wikipedia.org/wiki/Naked_short_selling

[Cyberman]

Big hedge funds actually BORROW huge amount of shares and then dump them in hope they can buy them back cheaper, thus make money on nothing.

This activity has no positive effect on market - they don't even have bloody money to buy those shares first, and then sell - the whole basis for shorting is fundamentally flawed.

People who dump huge amounts of borrowed shares are not predicting market will fall, they don't "punt" on it - they are actually manipulating market.

Absolutely correct AtW. This was the major reason for the demise in the Northern Rock share value, long before the liquidity shortage and the refusal of the BofE to initially lend to it caused a bank run and sealed its fate.
I see the BofE is now citing 'moral hazard' to other banks that wish to borrow Billions. Interesting times!!!

[Moscow Mule]

Absolutely correct AtW. This was the major reason for the demise in the Northern Rock share value, long before the liquidity shortage and the refusal of the BofE to initially lend to it caused a bank run and sealed its fate.

Eh?

http://www.lse.co.uk/ShareChart.asp?sharechart=NRK

Check the 5 year chart - you're talking rubbish.

The run on NR was caused by the BBC miss-reporting the extra funding that NR received from BoE during the liquidity crisis.

[Cyberman]

Eh?

http://www.lse.co.uk/ShareChart.asp?sharechart=NRK

Check the 5 year chart - you're talking rubbish.

The run on NR was caused by the BBC miss-reporting the extra funding that NR received from BoE during the liquidity crisis.

The BofE initially refused funding to Northern Rock. This was leaked and Robert Peston at the BBC reported that the Rock was in trouble and the run started.
After that the BofE panicked, realised it had made the wrong decision and found the Billions that the bank needed. Unfortunately it then needed over another 10 Billion to counter lost deposits.

[Diver]

Isn't that the squirrel's mating call?

Only When AtW uses Rohypnol

[AtW]

Only When AtW uses Rohypnol

wallnuts