NOVUS_ORDO_SECLORUM6 OP t1_iu8eov9 wrote on October 29, 2022 at 10:50 AM

Reply to comment by grimkhor in Are your shares being delivered - SECURITIES EXCHANGE ACT OF 1934 ? by NOVUS_ORDO_SECLORUM6

If your money making plans are to buy a stock and then later sell it at a greater value, it’s going to be more difficult to make money if you buy a stock and it is never delivered (FTD). It will show in your broker account but that doesn’t mean it was settled by the broker. Why would the seller FTD your stock? Because they sold you something that they don’t own so they can’t deliver it to you, which means that price you paid is just a price that is not necessarily the true market value of the stock. That means you may have overpaid (or underpaid but who knows, not you). The sellers that are FTDing and selling stock that they don’t own essentially want you to overpay because they want the price of the stock to go down, you sell at a loss, they buy the stock back at a lower price and then your loss is their gain, all while they never actually owned the underlying security at all. You basically just gave them free money because the SEC lets them FTD. Shouldn’t someone that sells something to you actually own the product, and also literally give you the purchased product?

StuartMcNight t1_iu8m1oj wrote on October 29, 2022 at 12:17 PM

grimkhor t1_iu8h0a2 wrote on October 29, 2022 at 11:19 AM

Ok but why should I care? If I buy a fake stock and can hold it for years and then I can still sell it later. I still get the dividends. The broker still sends me the votes for my stocks. Shutting down the stock market seems worse for me tbh.

NOVUS_ORDO_SECLORUM6 OP t1_iu8mzjh wrote on October 29, 2022 at 12:27 PM

You mentioned you can sell it later, but who is to say that it will be at a profit? It could be at a loss. And that loss could exceed whatever dividends that were paid out or positive company direction based on voting outcomes. If brokers continue to FTD on other trades for the same company you have invested stock in, over the years there is greater chance that the value of the stock will go down. And that is not necessarily from accumulating a massive amount of outstanding FTDs at any given time. Even if/when FTDs are settled, having existed at any point the FTDs dilute the value of the shares. The reason is that they are effectively producing more shares of the company than actually exist, and just like any example of supply and demand, excess supply devalues the underlying good. And that is just the direct effect that brokers who FTD have on the value of companies’ stock. By devaluing the stock, they are inhibiting the financial well-being of the company and limiting business potential based on a lower valuation. This can affect the success of the company and therefore indirectly devalue the stock.

This isn’t about shutting down the stock market, it’s about regulating the stock market per United States laws. The SEC is clear as day not doing so, which affects all investors and only enriches financial institutions. So are you against upholding the laws, especially when identifiable damage is being done?

AutoModerator t1_iu8mzk9 wrote on October 29, 2022 at 12:27 PM

Our AI tracks our most intelligent users. After parsing your posts, we have concluded that you are within the 5th percentile of all WSB users.

I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.

jackofspades123 t1_iu91q52 wrote on October 29, 2022 at 2:36 PM

You have no guarantee your vote counts actually

NOVUS_ORDO_SECLORUM6 OP t1_iu9dxq1 wrote on October 29, 2022 at 4:05 PM

This is true as well, my response was mainly to focus on how, if things even like a vote actually being counted properly existed, there is still a great issue with FTDs as far as an investment.

kinance t1_iu9d3ey wrote on October 29, 2022 at 4:00 PM

How do u make accurate assessment of price of anything if supply is manipulated. Say a world with 1 apple and 100 oranges the apple rare there is only 1. Now i will ftd apples when people buy them i sell hundreds of imaginary apple that i never deliver. I never have to deliver the apple i just keep money until people need to get rid of their apple to get something else.

NOVUS_ORDO_SECLORUM6 OP t1_iu9fm67 wrote on October 29, 2022 at 4:18 PM

Exactly. And to be clear, the industry justifies FTDs through rule:

Rule 203(b)(1) and (2) — Locate Requirements. Rule 203(b)(1) generally prohibits a broker-dealer from accepting a short sale order in any equity security from another person, or effecting a short sale order in an equity security for the broker-dealer’s own account, unless the broker-dealer has: borrowed the security, entered into a bona-fide arrangement to borrow the security, or reasonable grounds to believe that the security can be borrowed so that it can be delivered on the date delivery is due. Rule 203(b)(2) provides an exception to the locate requirement for short sales effected by a market maker in connection with bona-fide market making activities.

With this rule, the broker-dealer basically just always says either they had reasonable grounds to believe they could borrow the share or that they were participating in bona-fire market making activities. Yet there is no proof required at all to verify this, they literally just say it.

After this happens and a share cannot actually be located or borrowed come settlement, a FTD is generated.

So again, 2.6 Billion FTDs reported second half of September. 2.6 Billion times broker-dealers said they thought they could borrow a share and were wrong. Clearly an extraordinary amount of corruption.