It didnât say that it necessarily was occurring, but it was instead prophylactic in terms of protection. ---------------------- The SEC is passing out rubbers.
how dio you issue shares w/o a Board meeting? How do you vote shares if you don't how many are legitimately bought, but improperly sold? Why do you pay hundreds of thosands, even millions, to file documents with the SEC when you think you have the correct data, but the SEC knows you don't?
We're just doing the job (the SEC) should be doing,â he added. 'Naked' Battle Hits the States By Ed Zwirn, Staff Writer With the expiration of the Securities and Exchange Commission's temporary ban on the naked short sales of many major financial firms, the battleground over naked short sales has moved to the states, with the Securities Industry and Financial Markets Association crying foul over a ballot initiative set to face South Dakota voters in November. The measure, if approved, would ban naked short sales across the board and not be limited to Fannie Mae, Freddie Mac and the 17 financial firms covered by the SEC order. Saying it needed more time to collect and analyze data about its effect, the Securities and Exchange Commission moved to extend its temporary order banning. The SEC order, which expired 11:59 p.m. Tuesday, covered naked short sales of Fannie Mae, Freddie Mac and 17 financial firms. The agency said last it would initiate a rulemaking process that would include a new, presumably more permanent ban, shortly after the expiration. The South Dakota referendum is not the first time the states have tried to tackle the issue. The Virginia Senate and Arizona House of Representatives in late 2006 tried to ban naked short sales but the measures were quickly withdrawn. Utah, in May 2006, passed a law to stop the practice, but it was later overturned. The South Dakota initiative, however, is the first time voters will address the issue directly. âSIFMA strongly opposes state efforts to regulate short selling,â said a statement issued by the group this week. âSIFMA believes that not only is there no need for states to enact separate short sale rules but that such state regulations are expressly and impliedly preempted by federal securities laws and that they violate the Commerce Clause of the U.S. Constitution.â South Dakota State Rep. Hal Wick, a Republican, said he helped put the measure on the ballot to âprotect businesses from being put into potential bankruptcy from naked short selling.â âWe're just doing the job (the SEC) should be doing,â he added. Posted on Aug. 14, 2008
http://www.cnbc.com/id/15840232?video=823807421&play=1 Joe Kernen: Shorts are back. Yesterday was the first trading day following the expiration of the SECâs temporary ban against naked short selling on 19 financial stocks. Mortgage giant Fannie Mae fell four percent, which itâs a seven dollar stock. Four percent times seven is 28 cents. Other financials though did take a beating. The great debate now is whether the SECâs effort to help these 19 stocks actually worked, what effect it had on the markets. John Najarianâs here. John, Iâm looking at the Journal. Theyâve got a great take on this. Number one, trying to do an autopsy on this. They point out that the 19 stocks did have an average appreciation of about 26 percent since that July 15 announcement. But then looking at the other side they didnât do as well as the other financial stocks around, number one. But one thing I like at the end of this article in the Journal, John, ultimately the autopsy yields no definite up or down verdict. However, the talk of bailing out Fannie and Freddie has died down. Maybe this emergency order was a heck of a lot cheaper than a government bail out. John Najarian: Definitely, Joe. And at least itâs not coming from Congress. I think with the commissioner basically enacting this and taking those two words out that weâve mentioned so frequently â best efforts â I think it really did slow the feeding frenzy that can happen when you do get the fear trade really working through these stocks. So as the commissioner himself said, Mr. Cox, the purpose here wasnât that shorts are bad and that they should be driven out of the market. The purpose here was to slow down with a combination of electronic trading and the repeal of the Uptick Rule, there has just been a concerted effort in some cases that has been exactly what it is â an attempt to drive stocks lower. In other cases, itâs simply that the algorithms back off each time they sense that pressure hitting and then they continue to back off and you get that unvirtuous drop thatâs so dramatic, you can see 20, 30, 40 percent of the equity erased in a single â Andrew: John, but do you think it really worked? My colleague, Floyd Norris, made an, I thought, very articulate argument why it didnât, or at least itâs not clear that there really was an outcome one way or the other on this. John Najarian: I think Floyd is right about that, Andrew, but my point is that for the short term âcause we are talking the program trading, the algorithmic folks that are trading in sub-second hits to the market, every response back from those sub-second sell orders is obviously lower and lower and lower bids. So as they sense that pressure, these algorithms back off. So for the short term I think thatâs why you need to have something like this in place. Michelle: John, they had to delay the order because all these firms on Wall Street really didnât have the back office operations in place to actually make sure that they could physically borrow the shares before they instituted the trade. They delayed it so that could happen. Now that all that infrastructure is in place, if I run a major trading firm, arenât I going to still make people actually borrow the shares or now that the rule is off am I going to allow people to essentially naked short? John Najarian: I donât think it goes right back to where it was, Michelle, because I think a lot of firms are a little nervous about being in the cross hairs of the SEC for this particular type of trading. But when I started in the business I worked for a New York specialist firm. My job was to secure the borrow for the shorts that we were putting on at the time and I always had to do that. So to see people that are not doing that and that are attempting then to more or less game the system. Again, in the very short term do I think that it has an effect over weeks and months? No. I think it has an effect over two and three seconds, but thatâs all you need to do to get that avalanche rolling down hill and when you do, then thereâs just nobody standing in the way, especially if they throw a rumor on top of that. Andrew: If youâre right, John, what does that mean in the coming weeks ahead as people actually come back to work and start thinking about the financials again. You look at these stocks. Is that going to be an avalanche? John Najarian: No, I donât think it will be because like I say, Andrew, I think that being the focus of the SEC right now I donât think people want to get pulled into an SEC investigation, but I do think itâs back to fundamentals and supply and demand. Obviously the fundamentals are pretty miserable for financials. Thatâs why they deserve to be where they are. But for those moments in time when you can create a panic and/or when the systems are just pressing to hard I think the lack of an Uptick Rule or this particular change that the commissioner put in place at least as an experiment was a good experiment. Now whether they choose to extend that, weâll see. Or whether they choose to bring back the Uptick Rule, I think they need one or the other with the sub-second trading that I watch all day. Joe Kernen: Well you might know I guess, but just long-term they point out here also that those 19 stocks, short selling was 12 percent of the trading from January 1st through July 15th. For other financial institutions it was 13 percent. So the same there. Also, the SEC order â the risk adjusted return on the 19 stocks actually fell for the rest of the â and the rest of the financial sector, 73 other institutions actually performed better in the same period of time. John Najarian: Right. And again, Joe, itâs right back to â I mean the article, the editorial that Cox wrote in the Wall Street Journal. He said the purpose here isnât to demonize the shorts. People thought that it was. The purpose really was to take a look at the runs that go on because of this very, very fast trading and whether or not if you caused them to go out and secure the borrow first, it would make a difference. I think it did. Joe Kernen: What are these Al Gore-isms that we keep â Al Gore-ithms we keep talking about? Something for climate change, John? What are you talking about? Why do you keep bringing him up? John Najarian; Well, he invented the internet, Joe, as you know â Joe Kernen: Right. Michelle: After graduating from Divinity School. Joe Kernen: Google apparently uses Al Gore-isms. John Najarian: Thatâs right. And Iâm going to be using Al Gore-isms later today as well. Joe Kernen: Alright. Youâre welcome to it. I donât think heâs copyrighted them. Thank you, John. See you â [End of Audio]
I bet you already noticed this, Fly: Someone needs to teach this writer the difference between naked short selling (which has <b>always</b> been illegal), and the perfectly legal (for now) practice of shorting a stock which appears on the easy to borrow list, backed by a broker's affirmation that the broker is reasonably certain they'll be able to borrow the stock if need be. South Dakota is trying to pass a law against the latter practice, and not the former, as the article incorrectly states.
Rm the problem as i see it is if these physical borrowings become law across the board many brokers will take advantage of this and charge for borrows . i'm with 2 well known prop houses and they both were charging 1-3 cents per share for all the 19 stocks even though most had 3-7 billion shares outstanding.i don't mind if they require one to borrow but they must automate it and not gouge traders on borrows of stocks with billions of shares outstanding
......been telling you boys. We all lose. It only gets worse. The public will blur the distinction. The politicians will pick it up and demonize it. Had a lobbyist tell us, "........this is so big, the politician that runs with it makes the White House." That was before the primaries. But you get my drift. It's big, and some politician will use it to make hay. We suffer. still, it has to end, before we have no financial system.