I was looking at the 3 year MSB shorts chart yesterday and...

I was looking at the 3 year MSB shorts chart yesterday and comparing it against the SP chart for the same period, to try to work out what is going on with the shorters here. The thing is, whatever the SP has been, the shorter holders are still there - never seems to drop below about 5% of the share capital. Even when there has been a massive sharp increase in the SP after great announcements, the short chart is hardly affected. Where there are big drops in short positions, I can't see a consistent pattern lining up with increases in the SP.

My conclusion, is that a fair bit of the capital held short is not being held to profit from a falling share price.

Rather, I suspect that much of the short held capital is just being used to give traders volume to trade with on a day by day basis.

Say you want to sell cheap from your account A to account B. Well, account A has to have the shares to sell to account B - it can't sell naked. If they had to actually own the shares, they'd never be able to afford the volumes they trade in.

If they don't own the shares, they have access to huge numbers of shares to trade, limited only by their risk appetite, the 18%pa interest for borrowing the shares and their general security position. These people will have $millions in property and shares that banks have security over to give the guarantee to the owner of the shares, that the shorter is good for the deal to buy the shares if needed.

So then they push the SP around. They know when the SP is going to be higher and when it is going to be lower, because they are driving the price or at least have an implicit understanding with other traders do the same thing. They can as a result trade the ups and downs with much greater confidence.

As they have to ultimately return the shares, it is better they trade in a falling stock, or a stock they can make fall. Sexy biotechs in the middle of a long hard grind to get approvals are perfect fodder for their game.

The end result is the same, ie a falling SP. However, I doubt we are going to see a "short squeeze" with the unwinding of massive numbers of short posiitons, even on a good announcement. :-(

It is of course blatant manipulation. It really should be a simple matter for ASIC to put a stop to this, but they don't. Why? Cos A. it takes resources they are not given and B. the exchanges and trading platforms love the liquidity and trading volume it provides and they have the ear of Government and therefor ASIC.

I am still working out how to turn all of that to advantage! Any tips, please do tell!