Posted on 09/17/2008 7:39:29 AM PDT by devane617
U.S. securities regulators issued new rules Wednesday designed to protect investors against so-called "naked" short-selling, including requiring short sellers to deliver securities by the close of business on the settlement date and making clear that those lying about their ability or intention to deliver on time are breaking the law. "These several actions today make it crystal clear that the SEC has zero tolerance for abusive naked short selling," said Securities and Exchange Commission Chairman Christopher Cox. Cox was criticized by Senate Banking Committee Chairman Christopher Dodd on Tuesday for not doing more to prevent abusive naked short selling.
(Excerpt) Read more at marketwatch.com ...
if mom and pop 6-pack understood that their gov lets this crap happen, they would certainly take up arms.
what really grips me is that rules have been in place to prevent this type of trading, but no one seemed to care enough to stop it. i wonder why/how this change will help.
About freakin’ time! And this time,SEC, enforce those rules!!
Patrick Byrne of Overstock.com has been leading the charge on this. If the market ever comes close to leveling the playing field for the little guy, it will be due to fighters like Dr. Byrne. He’s my hero.
Personally, I think if a person wants to be naked when they short sell it ought to be their constitutional right. Who is the government to order us to have clothes on to sell or buy securities? In the privacy of our own homes even? What is the world coming to?
Are are they actually talking about self-abuse? Now that’s different altogether. Of course we would know about these people with all their hairy palms.
Oh, never mind.
at first, i thought Byrne was a nut. but it has become apparent that he was correct all along. no doubt short sellers took him down in a planned, methodical way.
Partly. The “uptick” rule was done away with by Reg SHO. In the “good ole days”, you could only short sell after an “uptick” (increase) or zero tick (flat) trade in the stock. Not any more...
“Naked” shorting is something different. That occurs when don’t own the stock you are selling short - selling when you own the short is a “covered” short sale. Here’s how it works—if you short sell 1,000 shares of something worth $10, you get $10,000 in your pocket TODAY. The only thing is, you need to come up with 1,000 on settlement day, which is 3 days later. If the price of the stock goes up, you are hosed. If the price goes down, everthing is good in your world. Depending on who you are, a firm may “borrow” the shares you sold if you don’t happen to have them, but you have a profit on the sale. It looks like the SEC is trying to tighten up location rules, delivery, hypothecation, and re-hypothecation.
I was down in Gainesville last Tuesday to see my doctor at Shands and will probably be back down there in a week or so.....
One essential of fascism is the use of government to keep the “little guy” out of the competition.
This is done by imposing regulations that the entrenched companies can comply with but are too costly for startups to conform to.
I’ll leave it as an exercise to the reader to determine which political philosophy endorses this practice.
http://en.wikipedia.org/wiki/Uptick_rule the sec suspends the rule after forty years to study it...this happened in 2007 and the market has been in turmol since
The SEC doesn’t enforce the current set of rules, why would we believe they will enforce this new set??
Naked shorting probably makes more money than legitimate stock trading. There is no way the market will allow the SEC to mess with it.
The Ibanks and their affiliate hedge finds have been up to their necks in naked shorting. What is happening now is they are eating each other because there is nothing left to eat.
The Ibanks hate each other. They would like to see the other fellow dead and gone. If they can short and naked short via a maze of affiliates to kill their competitor, they will do so without a second thought.
GS, LEH, MS and all the rest are behind the naked shorting. They permit hedge finds to sell shares without first locating the shares and then they allow a delivery later after liquidations have brought in the needed shares to close a phantom position. Those shares are then delivered. Often they are delivered after the 13 day deadline where the failure to deliver (FTD) has been listed on REGSHO. Many of REGSHO listings are months old, many months. REGSHO is never used for enforcing against violations. It is a joke other than to rub it in the faces of investors that the SEC could care less if some counterfeiter wrecks their investments.
One dirty secret behind shorting is the use of margin accounts to locate shares per hypothecation agreements. Often investors on margin will never know that their own shares have been sold out from under them and used to force them into a margin call and likely liquidation.
Wall St. is an information battle zone. Data describing those on margin and their aggregate positions are sold to predators who then organize a raid to force liquidations.
The only way to effectively circumvent the legal and illegal duping of investors is to put shares in a cash account or IRA account. But then frustration and futility will eventually cause investors to look for other investments because the naked shorters have an infinite supply of counterfeit shares to hold down sectors for a protracted period without consequence of REGSHO as FTDs are never prosecuted.
If the SEC was not complicit with the Ibanks in the naked shorting or FTDs, they could subpoena records from the DTCC and find out precisely who has been selling without locating. It is thought that the violations are so massive that the fallout would take down all the Ibanks. Who could recover the hundreds of billions taken from duped investors? How could one recover? The ill-gotten gains have been transformed into Bentleys, penthouses in Manhattan and homes in the Hamptons. And the people behind it are linked to Ibanks.
I am not disagreeing with you, but would like to point out that many of the people engaged in the most corrupt and underhanded actions are not in the regulated arena. Some one with a few million in their trust fund and access to the net can wreak considerable havoc (and make a hell of a lot of money for themselves) and not break any law at all.
Yes there are some bad firms out there and some good firms with some bad people in them, but most of what’s going on now has too many actors on the stage to point at one and declare “Aha, its YOU!”. Many of those actors will never see an SEC, State, Exchange, or FINRA regulator, nor anyone else that regulates the markets. But they more than played their part...
I am not disagreeing with you, but would like to point out that many of the people engaged in the most corrupt and underhanded actions are not in the regulated arena. Some one with a few million in their trust fund and access to the net can wreak considerable havoc (and make a hell of a lot of money for themselves) and not break any law at all.
Yes there are some bad firms out there and some good firms with some bad people in them, but most of what’s going on now has too many actors on the stage to point at one and declare “Aha, its YOU!”. Many of those actors will never see an SEC, State, Exchange, or FINRA regulator, nor anyone else that regulates the markets. But they more than played their part...
i agree. it is NOT the entire fault of NS selling. many hedge funds with big assets manipulate equities to their advantage, and it is completely legal. they figured a way to stay within the rules while wreaking havoc on many companies. same goes for individuals with big money to invest. our fast-paced electronic trading has made it easy to manipulate a stk, and that will not be an easy problem to fix.
if the puppies continue to play like they have been then they will be dog food for U$C...
You forgot to include politicians. by the way, excellent post!
I will be doing my online shopping at Overstock.com!!
LOL...even I don’t expect them to make it that far. They had their moment of glory....before the first kick off.
How ever been around Dawg fans....you’d think they played a world class team this last week...which they didn’t
trust me i am in the heart of puppy country... all i hear SEC blah blah blah... i was expecting more... after watching BYU dismantel the team that the Vols lost too... well... what can you say... personally i hope they make it... so i can stop hearing about it...
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