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December 12, 2017 | ‘Naked Shorts’ Should Not Be Allowed! Why?

Donald B. Swenson: Born January 24, 1943, Roseau, Minnesota. Graduated H.S. 1961, Moorhead High, Minnesota. Graduated College 1968, Moorhead State University, Minnesota. Designated member of Appraisal Institute (MAI), 1974. Employed with Western Life Insurance Company, 1968 – 71; Iowa Securities Company, 1971 – 73; American Appraisal Company, 1974 – 81. Part-time teacher/valuation consultant/bartender, 1979 – 2008 (taught workshops at Waukesha County Technical Institute, Wi. and Madison Area Technical College, Wi.). Retired 2008 (part time teacher/blogger), AZ. Self educated economist/philosopher/theologian: http://kingdomecon.wordpress.com.

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Naked shorts (no borrowing of an existing asset from the float) is a tool which is being allowed in our Futures Markets. Both the CMEgroup and the CBOE exchanges are now allowing ‘naked shorting’ for trading silver/gold and also bitcoin. Let’s briefly think about what is now allowed when I trade bitcoin. I can go ‘long’ or I can ‘short’ bitcoin, but when I do this (say I go ‘short’), I do not actually trade the bitcoin float at any of the bitcoin exchanges. I merely trade imaginary bitcoins which get created out-of-nothing as I enter my trade! The existing ‘float’ within the bitcoin exchanges are ignored.

 

This, to me, is a corrupt strategy and should not be legal. I can now trade bitcoin and settle my trade contract in digital cash with no borrowing of any bitcoins when I ‘short’. What does this do within our real-time markets? This ‘shorting’ and settling the trade in digital cash creates an ‘artificial’ (imaginary supply) of bitcoins within the electronic marketplace which then helps to drive the ‘price’ down (artificially). Excessive ‘shorting’ (naked contracts) suppresses the price within our markets (artificially). This, to me, is pure manipulation of price. Real Supply/Demand can not work given this corruption!

 

I have watched our silver/gold markets for the past 7 years (mostly since 2011) and ‘naked’ shorting (buying contracts electronically which are never settled in the metals) creates this increasing supply (artificial supply of silver/gold) and then drives DOWN the price of silver and gold. None of this represents real trading of the metals but is merely a strategy for suppressing the prices (artificially). This is a corrupt practice and our regulators should not be allowing this practice!

 

Trading a commodity should involve settlement/delivery in that commodity. This strategy of using ‘naked’ contracts which never are settled in actual bitcoins or in silver and gold (but mere digital cash) creates a marketplace where real supply and demand can not work. Artificial contracts get created out-of-nothing (a trader’s mind) and then these artificial contracts enter the electronic marketplace and suppress prices (artificially and ubiquitously). Computer algorithms can do this all day long (continually). How can this be viewed as real trading of a commodity?

 

Some 99+% of silver/gold trading (on the COMEX) is done via these ‘naked’ short contracts (settlement is in digital cash not the metals). We now have 100% of bitcoin trading on the CBOE also allowing ‘naked’ shorting. This, to me, should be illegal as it prevents the forces of real supply and demand from working. Think about all this corruption within our electronic markets. Why do our official administrators and regulators allow all this price manipulation? It destroys one’s sentiment for trading and it destroys price discovery.

 

Naked short contracts are a real problem today and few seem to want to change this daily corruption. I have written the CME and the CFTC but no-one even responds to my emails. It seems like we have higher-up authorities (the PPT) which desire this price manipulation within our silver/gold markets and now within the bitcoin markets. Our Futures Markets should not be determining our spot prices. This should be left to the forces of Supply and Demand within exchanges that trade the physical metals and the actual float of bitcoin.

 

Pass the word to all your trader friends and maybe we can get some pressure on those authorities which are allowing this corrupt practice. Naked shorting (the creating of imaginary contracts) should not be allowed in any of our Futures Markets. This is pure manipulation of our prices and it destroys all real sentiment for trading these select assets. Silver/gold and bitcoin should trade based upon real Supply/Demand of the actual physical metals and the bitcoin float…not a manipulated price within the CBOE or the COMEX. I am losing my confidence in our SYSTEM! I am: http:/./kingdomecon.wordpress.com.

 

P.S. The word ‘paper’ gold and ‘paper’ silver is no longer a valid expression for trading within our electronic (digital) markets IMO. I now trade electronically and I trade using digital dollars. I buy digital contracts (not paper contracts) as I enter and exit my trades. The word ‘paper’ silver and ‘paper’ gold is outdated language which needs to be eliminated from our lexicon. Our markets are now electronic/digital and virtual!

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December 12th, 2017

Posted In: Kingdom Economics

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