Broker Data, page-71

More thoughts on the short interest...

I have been watching the short selling activity in SGH over the last few months and found it confusing that there was regular short selling but yet no change to the % short interest on the chart.

Well I believe there are only two possible explanations for this but first to clarify how the data is reported, this is my understanding:

1. ASX provides a daily gross short sales report. i.e. this is the total reported number of short positions opened on the day. Short sellers ideally report gross short sales on the day but it is mandatory by T+3. These daily reports are shown in the table below. (http://www.shortman.com.au/stock?q=SGH) ASX daily gross report

2. ASIC collects and then reports aggregated net short interest, four days later. This is displayed in the chart below. I have cross-checked the shortman website data against the ASX and ASIC data and confirmed that the shortman data and chart is using the same data.

So, it is possible that during the course of a days trading, short positions can be opened, closed, more opened, more closed and so on. This I think explains situations I have come across where gross short sales exceed the total days trading volume.

Looking at the table below, up to and including Friday 16th December there were 362,865 new short sales, yet the chart did not move at all. On Wed 21st December there were 416,000 short sales, and the chart now shows the first movement on the chart for months...an 0.02% increase or 59,999 net new short interest. There were zero short sales on 22nd Dec, according to the ASX daily report.

Two possible explanations:
a) new short positions are being opened, but there are also an exactly equal number of short positions being closed by the end of the days trade, or
b) brokers are failing to report short selling activity to ASIC.

I think it would most likely be explanation A.

why would someone be doing this? I have a suspicion that the remaining short interest is mostly if not entirely one entity, and one theory I have read about is where short sellers can manage their exit from a position by further using short selling to drive down the SP and at the same time close the short positions opened previously (in this case, probably months ago). They close the same number of positions opened so that the short interest statistics dont change...i.e. an exit by stealth.

What I haven't been able to work out is, well, they still need to buy back, even if they have closed the original short position and reopened a new short position at a lower price...? Perhaps taking profits with an expectation of further falls in the SP. Maybe an insider-type off market trade or something dodgy like that to close the position without sending the SP to the moon.









Having a look at the days with high short sales activity, the 9th December and 21st December it is clear that the short selling was very effective at driving down the share price




And a closer (hourly) look at both of those days...look at all of that buying after the initial sell off:



I am trying to tie this in with the broker data and other information.

To be continued...

P.S. I am surprised there was no sell off today after the finance amendments announcement.