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Old Apr 17th, 2012, 03:59 PM   #1
Don Bright
 
 
Join Date: Oct 2001
Location: Las Vegas, NV
Posts: 11,757
Ah geez, I hate this kind of thing.

SEC Charges OptionsXpress With Naked Short Selling

http://www.fa-mag.com/fa-news/10643-...t-selling.html

Don
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Old Apr 17th, 2012, 11:03 PM   #2
Whistlingleaf
 
 
Join Date: Nov 2005
Posts: 336
"Specifically, from Jan. 1, 2010 to Jan. 31, 2010, optionsXpress customers including Feldman (a client) accounted for an average of 47.9 percent of the daily trading volume in one of the securities. In 2009 alone, the optionsXpress customer accounts engaging in the activity purchased approximately $5.7 billion worth of securities and sold short approximately $4 billion of options. In 2009, Feldman himself purchased at least $2.9 billion of securities and sold short at least $1.7 billion of options through his account at optionsXpress, the SEC says."

All I can say is WOW ! Almost half of the volume for a security ... it's a shame they don't tell what he was shorting.
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Old Apr 18th, 2012, 12:38 AM   #3
babutime
 
 
Join Date: Feb 2012
Location: Canada
Posts: 451
Good. Another set of douchebags out of the way...
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Old Apr 18th, 2012, 03:29 AM   #4
Rationalize
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Join Date: Jan 2010
Posts: 841
Quote:
Quote from Whistlingleaf:

"Specifically, from Jan. 1, 2010 to Jan. 31, 2010, optionsXpress customers including Feldman (a client) accounted for an average of 47.9 percent of the daily trading volume in one of the securities. In 2009 alone, the optionsXpress customer accounts engaging in the activity purchased approximately $5.7 billion worth of securities and sold short approximately $4 billion of options. In 2009, Feldman himself purchased at least $2.9 billion of securities and sold short at least $1.7 billion of options through his account at optionsXpress, the SEC says."
The article leaves out anything about the actual naked short selling.

Implies that writing options is "bad / illegal"

Buy stock, sell options, go to prison?
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Old Apr 18th, 2012, 08:44 AM   #5
Options12
 
 
Join Date: Sep 2011
Posts: 550
Quote:
Quote from Rationalize:

The article leaves out anything about the actual naked short selling.

Implies that writing options is "bad / illegal"

Buy stock, sell options, go to prison?
Read more here.

http://sec.gov/litigation/admin/2012/33-9313.pdf

See the section titled "Rule SHO" for more info on why the reset transactions constitute a violation.

3. The sham resets were accomplished by optionsXpress facilitating its customers buying shares and simultaneously selling deep in-the-money call options that were essentially the economic equivalent of selling shares short. The purchase of shares created the illusion that the firm had satisfied the close-out obligation; however, the shares that were ostensibly purchased in the reset transactions were never actually delivered to the purchasers because on the same day the shares were “purchased,” the deep in-the-money calls were exercised, thereby effectively reselling the shares.

4. These paired reset transactions were not bona fide purchases because their purpose was to perpetuate an open short position while giving the illusion of satisfying the delivery and close-out requirements of Reg. SHO. These sham transactions thus allowed optionsXpress and its customers to engage in what amounts to a stock-kiting scheme that deprived true stock purchasers of the benefits of ownership.
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Old Apr 18th, 2012, 10:31 AM   #6
Rationalize
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Join Date: Jan 2010
Posts: 841
Quote:
Quote from Options12:

Read more here.
3. The sham resets were accomplished by optionsXpress facilitating its customers buying shares and simultaneously selling deep in-the-money call options that were essentially the economic equivalent of selling shares short. The purchase of shares created the illusion that the firm had satisfied the close-out obligation; however, the shares that were ostensibly purchased in the reset transactions were never actually delivered to the purchasers because on the same day the shares were “purchased,” the deep in-the-money calls were exercised, thereby effectively reselling the shares.
Exercise a call to sell shares? Wow.
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