More info from http://www.ncans.net/index.htm Very good topics to know; and as long as the government can treat the market as a giant ATM; then there are people will rig it.
Show made a trememdous impact all over the country. The Primes can ill afford a squeeze on these stocks; the perps will run, leaving the Primes holding the sack. Interestingly, operators are buying up selected pennies, getting size, calling the source of the borrow and saying, "we're coming after you." Then they are selling the cover. Very profitable for them.. This is the next crisis on top of sub prime. You think there is no liquidity now????
I think this is only the begining.... I stumbled upon this in '98 when a company I owned just got crushed when the fundementals were decent. I have since watched 22 companies just get decimated. All had valid fundementals and growing prospects. When the whole story comes out, it will make for a good movie.
They just need to have a 5% fine for any shares that are shorted but not in inventory at the close of each day and it will stop. 5% is not so much that the broker won't survive a mistake, but enough that they won't make a mistake often.
Byrne tried to gbet the STATES to adopt such a policy, and Wall St. went out with sacks of money and scuttled it. Research Arizona, Utah, I forget the other two. They basically introduce the law, in Utah'scase pass it, and then the Wall St. Lobby group first threatens, then cajoles........ The law says, States can't demand separate reporting. So a couple of States say, "give us what you give theSEC, same stuff". No go. Cockroaches hate sunshine.
The First Annual Capital Markets Summit: Securing America's Competitiveness Date: 14-Mar-2007 8:15 AM - 5:00 PM Comments by Chairman Cox during Q & A. AUDIENCE MEMBER: Chairman Cox, Jonathan Johnson, Overstock.com. You have mentioned in the past that abusive naked short selling is being used to manipulate stock prices down to the detriment of investors. Last month, the Chamber sent a letter requesting that Congress hold hearings on the issue and last night Bloomberg TV ran a piece, a special report, on this issue. What is the commission doing to stop this form of manipulation and when can we expect some action? CHAIRMAN COX: Abusive naked short selling is of great concern to the entire Commission, to all of our members and the professional staff at the SEC. The regulation that was first adopted to get after this and related problems, Reg SHO, has proven insufficient to stop the problem. One of the reasons is the Grandfather provision in the rule as it was originally adopted, so we are now setting out, as you know, to eliminate that grandfather provision. And we will do more. Just as Congress may well have hearings on this issue and seek to get more information, so too are we looking at this. As you know, there's a technological side to this. This is very closely connected to our system of clearing and settlement in a very very big market, and we want to make sure that we use technology as our friend in relating, potentially and at all times, ownership and particular shares rather than waiting until the end of an arbitrary period of time to match those things up. It's those sorts of things that I think will eventually help us, I think, put an end to this kind of abuse. And I know that people victimized by it have a great deal of right on their side to complain about it. CHAIRMAN DONAHUE: You have a lot of support from here in getting that done. Just let us know how we can get some muscle behind it. It is a serious challenge.
Forbes article from today: Goldman Snared In Naked Shorting Probe Liz Moyer, 03.14.07, 4:10 PM ET One of Wall Street's biggest prime brokers has been taken to task by the Securities and Exchange Commission and the Big Board for not catching on to its customers' illegal trading activities. Goldman Sach's (nyse: GS - news - people ) clearing and execution division is paying $2 million to settle accusations it relied too heavily on what its customers told it without investigating trading activity that showed signs of something being amiss. The SEC and NYSE Group's (nyse: NYX - news - people ) regulatory arm announced the enforcement action Wednesday. They contend that Goldman's reliance on its customers' assurances was "unreasonable" in a case involving illegal short selling in shares of NYSE- and Nasdaq-listed stocks during and after the bursting of the tech bubble in 2000 to 2002. Prime brokers coordinate trades, lend stocks for trading and provide other services for hedge funds and smaller broker-dealers, and the business has become increasingly lucrative. According to New York-based research firm Vodia Group, prime brokers--Goldman, Morgan Stanley (nyse: MS - news - people ) and Bear Stearns (nyse: BSC - news - people ) are the big three--rake in as much as $10 billion annually. It is also a business increasingly under scrutiny by those who say illegal trading is flourishing under the not-so-watchful eyes of those who are in a position to stop it. Several private lawsuits have been filed since last year against the dozen or so top Wall Street banks, most recently a $3.5 billion suit filed last month in California state court by Overstock.com (nasdaq: OSTK - news - people ), a Salt Lake City-based Internet retailer. That suit claims 10 brokerages engaged in a "massive, illegal stock market manipulation scheme" to distort its stock by allowing naked short selling, that is, allowing shares to be sold short without being properly borrowed. Naked short selling creates a number of problems, most notably trade delivery failures in the stock in question. Sometimes it is accidental and sometimes it is deliberate, part of a strategy to short stocks that are hard to borrow. The SEC has been debating ways to close loopholes in a two-year-old regulation originally passed to clamp down on the deliberate form of naked short selling, but it has yet to announce revised rules even after receiving hundreds of comment letters on proposed amendments. The proliferation of electronic trading might even be making it easier to pull off trading scams like naked short selling, regulators said Wednesday. The Goldman enforcement case centers on trades ordered by clients through its REDI electronic exchange access system that were improperly marked "long" sales when they were actually short sales. The customers, Ethan Weitz and Robert Altman of Orinco Partners, were shorting shares of companies that were about to do a secondary or repeat stock sale, covering the open short position with the offering shares. This violates trading rules. Weitz and Altman paid $1 million to settle SEC charges in the scheme in 2003. The SEC and NYSE Regulation said Wednesday that Goldman's clearing division (formerly Spear Leeds & Kellogg, which was acquired by Goldman in mid-2000) could have discovered that its trading and clearance records revealed the pattern of unlawful trading. They also said Goldman could have discovered that it was improperly lending the customers borrowed and proprietary securities to make deliveries on their long sales and closing their short positions with shares they purchased in the secondary and follow-on. Goldman's records had information that reflected the customers were engaged in a pattern of selling securities short and repeatedly failing to deliver, the SEC said. Goldman records also had information reflecting it was improperly lending customers securities to make deliveries on these purported long sales. Linda Chatman Thomsen, the SEC's director of enforcement, said allowing customers to use direct-access computer trading systems "does not obviate a broker's own responsibilities under the commission's short sale rules, and it certainly does not allow a broker to ignore apparent discrepancies indicating illegal trading by its customers." Susan Merrill, the executive vice president of enforcement at NYSE Regulation, said "blind reliance" on what customers say is "inappropriate when a firm is confronted with a customer's repeated failures to deliver and other evidence of improper short selling." Josh Galper, the managing principal of Vodia Group, says electronic systems were less sophisticated seven years ago than they are now, and that Goldman's REDI now has a stock availability feature that would make it harder to pull off the same scam today. Apart from whether the enforcement action will have a chilling effect on communications between brokers and customers, the small fine relative to Goldman's prime brokerage business isn't likely to have much of a deterrent effect on the rest of the industry. Goldman was censured and subject to a cease-and-desist order in the matter. "While the NYSE and SEC have proven themselves to be serious about reporting violations related to trades monitoring and securities lending," Galper said Wednesday, "the dollar amount of fines in this and other recent cases appears to be more a cost of doing business than a real reason to make change happen."
SHe and Josh have it right. the slap on the wrist doesn't bother them. This is going to have to be, "move over SEC. Let real men handle this." It's coming by the way. I believe Aguirre has slain the SEC.
Agreed, hopefully the Bloomberg special will lead to more enforcement. I just thought the Forbes article interesting in it's timing.
Do you mean the article, or the "enforcement". I only wish my dad punished me like that. The enforcement is interesting, because on Dec 5, in front of the Judiciary Committee of the US Senate, Aguirre said, in eleven years, the SEC brought two cases amounting is a few thou in fines. All of the sudden, you think the Lone Ranger came back to life. What a joke. I wonder what happens when Wall St. steals ALL the money? what do they do then?