Short Selling in NZ

[epower]

Came across this today

https://i.stuff.co.nz/business/indus...falling-market

Anyone doing or done short selling on the NZX on Sharetrader?

Love to hear your story on it

[stoploss]

I Use CMC markets to short shares , CFD ( contract for difference )

[SBQ]

Came across this today

https://i.stuff.co.nz/business/indus...falling-market

Anyone doing or done short selling on the NZX on Sharetrader?

Love to hear your story on it

As in the article, going short on NZ equities is rare. Hell I tried to enter short positions on NAKD which trades on the Nasdaq and TDAmeritrade didn't have any allocated shares to lend.

The issue is not that one can go short but rather, more to do with the broker you choose. Even more concerning, the particular stock you're betting against and what liquidity would it offer in order to close your position (something I doubt the NZX is really capable of offering). Any broker, in order for them to allow their clients to take short positions requires them to find someone (another broker or major client) willing to LEND those shares. As energetic these trades are in the US equities, there are still limitations due to again, which broker you trade with. The big boys that take short positions usually don't mingle with the small retail market (just like in the IPO sense). Meaning your order to short goes unnoticed and unfilled ; while the key players that do - do so off the record.

The article also says regulations say you can't stay in short position for long. Such as when dividend dates are declared meaning you have to close your position before then. These regulations by the NZX make any proposition to profit even more riskier. Yet from the basic eye - long term majority of NZX listings go bust. This is to protect overseas brokers from hammering on the NZX and raping it knowing that so many small listed NZX companies go bust ; so naturally there will be more regulations on the NZ end of things.

With high commissions and slow executions of trades, why do you want to mess playing on the NZX by going short?

[stoploss]

As in the article, going short on NZ equities is rare. Hell I tried to enter short positions on NAKD which trades on the Nasdaq and TDAmeritrade didn't have any allocated shares to lend.

The issue is not that one can go short but rather, more to do with the broker you choose. Even more concerning, the particular stock you're betting against and what liquidity would it offer in order to close your position (something I doubt the NZX is really capable of offering). Any broker, in order for them to allow their clients to take short positions requires them to find someone (another broker or major client) willing to LEND those shares. As energetic these trades are in the US equities, there are still limitations due to again, which broker you trade with. The big boys that take short positions usually don't mingle with the small retail market (just like in the IPO sense). Meaning your order to short goes unnoticed and unfilled ; while the key players that do - do so off the record.

The article also says regulations say you can't stay in short position for long. Such as when dividend dates are declared meaning you have to close your position before then. These regulations by the NZX make any proposition to profit even more riskier. Yet from the basic eye - long term majority of NZX listings go bust. This is to protect overseas brokers from hammering on the NZX and raping it knowing that so many small listed NZX companies go bust ; so naturally there will be more regulations on the NZ end of things.

With high commissions and slow executions of trades, why do you want to mess playing on the NZX by going short?

SBQ can you substantiate " long term majority of NZX listings go bust."

[SBQ]

SBQ can you substantiate " long term majority of NZX listings go bust."

Well just look at the composition of the NZ50 index and compare how many of those companies existed 50 years ago? How many 20 or 30 years ago? Go over in the US equities and compare - if any large cap drops out or nearly goes bust, they become a buy out target (can't say the same for many NZ listings - even successful ones like Xero simply abandon the NZX for ASX. Sure there are some large caps that go bust such as Enron but the bottom line is 'quality'. Then there's the issue of listing requirements where the NZX is far more slack that favour the insiders more than the retail investors. Then add the nonsense that NZ shareholders expect dividend payments (despite keeping the profits within the company would generate higher share prices which are tax free capital gain vs dividend payments triggering a tax liability) is beyond me. No wonder investments like the TWG have no capital gains - perhaps a loss when inflation adjusted.

@ Ferg:

That chart is meaningless. As I said before, it's highly broker dependent on what shares you can take a short position. Even a large broker like TDAmeritrade (which is larger than any NZ/Aus broker; would not have large holdings of 'borrowed shares' of such companies says enough. This is the stuff that the NZ FMA is entirely clueless when advising the public about finance and investing. Just look at their negative statement about options and derivatives in a way that 'scares' people when it comes to investing. You know there is a big difference between Robin Hood platforms and well.. your dinky Sharesies / Hatch platform. But the FMA touts these foreign brokers as risky and oohh scary because they allow derivative trades. FYI, the FB FMA has muted me as i've made these statements on their FB page (yes the truth hurts).

Anotherwords, those that are in the serious business of shorting are in a different class altogether. They have a broker that is 'able' to find someone willing to lend their shares in the company they want to go short on ; and it's not just any broker, it's the relationship they have where the broker gives preferential treatment to them. The small guy is simply out of luck.

The unique thing about Robin Hood is they have clients that are stupid enough to make risky bets which opens their landscape for wild west investing. Therefore, they're able to find enough shares to borrow for their clients that want to go short. I can't imagine any broker who does not offer options and derivatives, are able to also offer short positions as both practices are somewhat related in creating such trades.

[Ferg]

As in the article, going short on NZ equities is rare. Hell I tried to enter short positions on NAKD which trades on the Nasdaq and TDAmeritrade didn't have any allocated shares to lend.

Thanks for sharing your thoughts.

Per here it appears there are shares available for NAKD:
https://iborrowdesk.com/report/nakd

but from what you are saying, these shares might not be available to retail investors, depending on your broker. Is that correct?

[peat]

not that I am aware of 'thebusinessman'
our market is thin enough at the security level that derivative level just doesnt get a chance

but there are A2M derivatives shown on the ASX

https://www2.asx.com.au/markets/trad...ck-derivatives

[peat]

As in the article, going short on NZ equities is rare. Hell I tried to enter short positions on NAKD which trades on the Nasdaq and TDAmeritrade didn't have any allocated shares to lend.

The issue is not that one can go short but rather, more to do with the broker you choose. Even more concerning, the particular stock you're betting against and what liquidity would it offer in order to close your position (something I doubt the NZX is really capable of offering). Any broker, in order for them to allow their clients to take short positions requires them to find someone (another broker or major client) willing to LEND those shares. As energetic these trades are in the US equities, there are still limitations due to again, which broker you trade with. The big boys that take short positions usually don't mingle with the small retail market (just like in the IPO sense). Meaning your order to short goes unnoticed and unfilled ; while the key players that do - do so off the record.

The article also says regulations say you can't stay in short position for long. Such as when dividend dates are declared meaning you have to close your position before then. These regulations by the NZX make any proposition to profit even more riskier. Yet from the basic eye - long term majority of NZX listings go bust. This is to protect overseas brokers from hammering on the NZX and raping it knowing that so many small listed NZX companies go bust ; so naturally there will be more regulations on the NZ end of things.

With high commissions and slow executions of trades, why do you want to mess playing on the NZX by going short?

some misleading statements here.... for instance

"regulations say you can't stay in short position for long. Such as when dividend dates are declared"

using CFD's (which is how I imagine most retail investors take short positions ) avoids this concern.

Liquidity is just a constraint on position sizing . so this will limit larger players but actually offers a liquidity premium to smaller players.

And you've been pulled up on the main grandiose statement regarding going bust. So I think you should consider being less authoritative about what amounts to only your opinions

[SBQ]

some misleading statements here.... for instance

"regulations say you can't stay in short position for long. Such as when dividend dates are declared"

using CFD's (which is how I imagine most retail investors take short positions ) avoids this concern.

Liquidity is just a constraint on position sizing . so this will limit larger players but actually offers a liquidity premium to smaller players.

And you've been pulled up on the main grandiose statement regarding going bust. So I think you should consider being less authoritative about what amounts to only your opinions

If you read epower's link to the article:

" To avoid complications with imputation credits, short positions have to be closed out by the record date for any share dividend, limiting the length of time that investors can short blue-chip stocks."

Your reference to CFDs is misleading and falls under equity swaps (which has no relation to short positions although a person can take a short position under a contractual relations). The key difference being... Contracts For a Difference relies between 2 parties with clear distinct bets and this can either be on the long side or the short side.

A good example of where CFD have exploded was last month here:

https://wolfstreet.com/2021/03/29/ar...its-the-banks/

"A CFD is a contract between the trader, such as Archegos, and the broker such as Credit Suisse, Nomura, Goldman Sachs, etc. It’s a type of equity swap. Leverage can be huge, and trading is opaque and does not involve an exchange, but takes place between the trader and the broker or a market maker or between parties. In the US, CFDs are illegal for retail traders, but not for hedge funds."

I'm not seeing how small players will get a premium on low liquidity. What is more relevant I see with penny stocks is they go big on the debut and over the years.... they fizzle out in volume leaving the small guy stuck with shares that become il-liquid. Their limit order to sell could go sitting for days or their broker advises that you need to lower the price dramatically so the ask price is attractive enough.

I reaffirm my stance on investing in NZ shares. The historical contents shows companies on the NZX panders to the insiders and screws the retailer share holders by sprinkling them a bit of income streams such as dividends. They don't explain the full impact of share dilution (which I think happens way too often for the various listed companies on the NZX). What option do these listed companies have anyways? If the profits are flat, then expect the share price to be flat (or negative if they are forced on some dividend payout scheme - hint: I'm looking at The Warehouse Group).

I tend to view being a shareholder of a company means you're a "partner" in the business of the company. That means the insiders are on level playing field with the shareholders. This is not what I see for companies listed on the NZX. Have a look at this My Food Bag offering and sit back, wait and see all those insiders getting ready to unload; and therefore, such behaviours is nothing more than a 'bust' in my books.

[peat]

Your reference to CFDs is misleading and falls under equity swaps (which has no relation to short positions although a person can take a short position under a contractual relations). The key difference being... Contracts For a Difference relies between 2 parties with clear distinct bets and this can either be on the long side or the short side.

what sophistry is this ?
are you seriously excluding a CFD from the universe of short positions because its an equity swap or some such rubbish???

I dont know how far you want to go to prove your point but I am currently short AIR and whatever you want to call it I will benefit if the price falls. If thats not a short position then blow me down I'm a fairy princess.