I think the bottom line of this new FINRA 6460 mandate for MMs to reveal the total size of their limit orders that constitute the high bid or lowest offer is to empower the “whales” playing the long side over the “whales” playing the short side. By the “whales” playing the short side I’m referring to usually corrupt MMs and a host of corrupt naked short selling hedge funds directing them order flow in exchange for access to their “bona fide MM exemption” from making pre-borrows before short sales.

Over the last 50 years these criminals have destroyed perhaps thousands of development stage U.S. corporations by simply refusing to deliver the securities they sold. Their problem right now is that they have amassed enormous naked short positions in several companies that accidentally got misdiagnosed as a “scam” run by crooks while the corporation ended up “having the goods” after all. Before 6460 this was no big deal because they could just simply naked short sell fake shares into any buy orders that appeared no matter how large they were.

When reporting trades on Wall Street investors have no clue as to whether or not any given trade was a buy or sell. They don’t know if the Mm was acting as a broker/agent or principal/dealer. Thus the activities of huge buyers of shares could be dismissed as being probably half sales by frustrated shareholders even if no shareholders were selling. With the new transparency “whales” operating from the “long” side can now flex some of their critical mass by posting large buy orders. Of course there has to be money behind the buy order as that bid could be hit at any time. If back during the “bad old days” a given MM ran up a 200 million share naked short position in XXX suddenly saw a massive buy order being posted what might he do in the case of XXX type company?

Do you hit the bid and add to your naked short position and double down on your hope that XXX doesn’t “have the goods”? Will your Chief Compliance Officer whose neck is in the noose if you guess wrong even allow it? Without 6460 this dilemma never arose because a purchase order for 10 million shares was always labeled as 5,000 shares. With 6460 the long “whales” can FORCE the naked short “whales” into making some tough decisions. The first goal of the crooks would be to hide that large buy order from the public so that little “fish” taking comfort in this “backstop” don’t start taking out the offers. The three options would be to naked short sell into that order, play “leap frog” and jump the bid by a notch in order to cover up the order or head for the exits and start covering before other naked short sellers in similar positions start covering. Before 6460 there was no sense of urgency to take action as the public never got to see the size of that order.

It’s critical to acknowledge the difference from a “manipulation” point of view in long opportunistic “whales” taking large long positions at ultra-cheap prices in heavily naked short sold stocks with “the goods” by spending real money and abusive naked short sellers selling nonexistent shares into buy orders with the intent to manipulate share prices downwards and with no intent to ever deliver that which they sold. When the illegal naked short positions are covered and purchased shares are delivered then an unmanipulated “supply” variable can interact with an unmanipulated “demand” variable to “discover” an unmanipulated share price via the price discovery process.

Don’t forget to follow Mark Mitchell’s new release on deepcapture.com illustrating the nature of the mega-mega-mega-whales that have been destroying U.S. corporations via abusive naked short selling “bear raids”.