Feb. 15, 2023
February 15, 2023 Since most brokers sell their order, just informing the investor is insufficient. Further, the investor doesn't know if their broker or contracted service shorted the order. It is too bad that investors can't buy and sell with natural trading partners. Where does the finance industry get their $ and information? From the investors, through order flow. So if the shortseller does not produce the trading unit by time of settlement, does the clearinghouse kick the non-productive trade? It means the trade was a naked shortsell. The clearinghouse should buy in the trade. The buying broker should buy in the trade. The selling broker should buy in the trade. And it shouldn't be kicked out for nonproduction. Execution services never give the investor the best price. Their business model is built around getting inside information on supply and demand through order flow. Their business model is designed to be profitable, by reserving the best price for the execution service. The investor has no choice. The investor often has to pay a sizeable fee to have their stock sent to them. Maybe the broker wants to mitigate the price to buy in the stock. The broker, if they hold the stock, probably has their name on the title, so they have to send it to the transfer agent to put the customer's name on it. You see, all of this is done without the customer's consent. The inside information is generated by aggregating all the order flow to help the execution service assess supply and demand in the market. Third party execution get to see price and size of orders in aggregate and act accordingly. The order belongs to the investor. Brokers try to control their investors' orders by offering margin customer terms for their order. Even a cash investor has no choice. Then it is sold to a third party and aggregated into order flow. Brokers control it by selling the order to third parties. Through this process, prices are depressed, harming the investor. All customers can't receive a price in the top 50% of the orders executed. Shortselling is not price discovery. It is price depression and the industry is structured to enable shorting against the investor. I would estimate a large part of the current rules are designed to enable shortselling. Orders belong to the customer. I would rather pay a higher commission to avoid order execution by a third party.