The short interest has yet again raised on NYX. It is now reported as of Feb 15th at just under 32M shares. It increased amost 5M shares last month! This is why the price is so depressed on the stock. It is still on the naked short list and no one is doing anything about it.
While I am very long on this stock, there is no legal reason that the NYSE (SRO) should allow this to be attacked by short sellers who do not deliver stock. Without any dividends being paid, they have no reason to close out their position regardless of how high the price goes since if they do not deliver the shares and they don't have to pay dividends and no one forces the shares to be delivered, what motive would they have to take a loss by closing out their position or finding shares to make good on their short sale!
Your question is a little complicated to answer on a message board, but in general, when you own a seat on an exchange, you are given the opportunity to trade on their platforms the products that are traded within their exchange. Hence, you may not have a seat on the NYSE but you may have a seat on the Pacific Exchange or some other smaller exchange which is allowed to trade NYX shares. When you enter a sell short order directly, you are pledging the fact that you will be able to deliver the shares you sell short in the legal settlement time t+2 days. The trade confirmation goes to the DTCC for settlement and when the shares are not delivered, there is a Fail to Deliver registered. The DTCC reports this and asks for the non-delivered shares, but has no power to enforce the delivery of the shares. The buyer of the shares is given what amounts to a credit memo saying he has ownership of shares but they are not delivered. This is tracked on paper but unless there is some enforcement of clearing the transaction the failed to deliver shares can sit there forever. When there are 6M-7M shares trading on a daily basis, it is difficult to track all the transactions. This is partly what the DTCC is suppose to do, but when there are problems, it is up to the SRO to enforce. Since each exchange is considered an SRO it becomes a problem when the shares are listed on the NYSE and traded on the PSE (or other exchange) and not delivered. It is really up to in my example the PSE to enforce the trade and by REG SHO guidelines, they should force the purchase of shares from the open market to fulfill the delivery requirements. This part of the enforcement is what is not happening.
Some here claim the short interest will go down after the merge is complete. Some think the short interest will go down when the lock up is over on March 8. I personally don't think either of these events will cause a reduction of short interest. If anything, I think there may be more short shares after those two events but never the less, I hold a very large long position. I am trading about 1/2 of my position on a daily basis to capture profits from some of these ups and downs.
Arbitrage is a potential of NYX short selling, but the volume of Euronext is so small that it is contibuting very little to the NYX short selling.
Even if that was a possible situation, it is illegal to sell short and not deliver. The enforcement of the Fail to Deliver shares is the responsibility of the SRO which is the NYSE in this case. I don't understand why they do not enforce the delivery of their own shares of stock according to the law.
You and I can't sell naked, why should some big fund which has access to enter orders where we can not go. We have to go through our own retail brokers and they will not let us do it.
they have to deliver the shares at settlement date ... so they have to find someone who is willing to lend them the shares and they will charge them interest for this, and if the shares do pay a dividend they have to pay that as well. Just think how high the shares might go if they unwound all the positions but it is probably about the merger and they are taking positions ahead of that ... so don't worry ..
People keep thinking the merger is the reason for the naked short selling. Selling something without delivering is illegal. You and I can't sell some shares short and say wait until later when I get some shares.
This is why the company is showing up on the REG SHO list. I have written a letter to the NYSE and have gotten responses regarding the investigatiion of this illegal activity.