posted
wow, these guys are amazing. for years they looked the other way while the markets have have been plundered. now? the tables have been turned and they are going to take some action?
SEC to limit naked shorting of Fannie, Freddie, brokers
By Alistair Barr Last update: 1:29 p.m. EDT July 15, 2008SAN FRANCISCO (MarketWatch) --
Christopher Cox, chairman of the Securities and Exchange Commission, said on Tuesday that the regulator will try to limit so-called naked shorting of shares in Fannie Mae (FNM:
The SEC will issue an emergency order stating that all short sales of shares in these companies will be subject to a "pre-borrow" requirement, Cox explained. This will last for 30 days, he added. The SEC is also planning more rule-making focused on the broader market, Cox said. In a typical short sale, traders sell borrowed shares, hoping to buy them back at a lower price and return them to the lender. The difference is kept as profit. In naked shorting, a trader shorts a stock without first making necessary arrangements to borrow shares. That sometimes means the seller fails to deliver the stock to the buyer and the trade can't be settled, running afoul of securities laws. End of Story http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B2E426D41-7D14-4A5D-9AB8 -85C04FCAAA24%7D&siteid=yhoof2
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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posted
``In addition to this emergency order, we will undertake a rulemaking to address the same issues across the entire market,'' Cox said in his remarks to the committee.
The SEC has been investigating whether trading abuses contributed to the collapse of Bear Stearns Cos. in March and the 78 percent drop in the market value of larger rival Lehman Brothers Holdings Inc. this year. Fannie Mae and Freddie Mac have each lost about 80 percent of their value amid speculation the mortgage-market crisis may push the firms into insolvency
i am just shocked that these guys only took 5 years to figure WTF has been going on in the stock market.
and the criminals continue to make light of the activity:
``I don't think the government should ban short-selling in anything as long as it's fully disclosed, as long as there's no manipulation,'' MFS Investment Management Chairman Robert Pozen said in an interview with Bloomberg News yesterday. ``Don't we want the market to work here?''
Naked short selling isn't illegal in most cases, unless authorities can prove fraud, such as a scheme to manipulate stock prices.
LOL.... if issuing a share that you have created out of thin air yourself isn't counterfeiting? what is? the only people with the legal right to create shares is the company that they represent.
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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posted
The SEC will issue an emergency order stating that all short sales of shares in these companies will be subject to a "pre-borrow" requirement, said Christopher Cox, chairman of the SEC. This will last for 30 days, he said. The SEC is also planning more rule-making focused on short selling in the broader market, Cox said. In a typical short sale, traders sell borrowed shares, hoping to buy them back at a lower price and return them to the lender. The difference is kept as profit. In naked shorting, a trader shorts a stock without first making necessary arrangements to borrow shares. That sometimes means the seller fails to deliver the stock to the buyer and the trade can't be settled, running afoul of securities laws. Imposing a "pre-borrow" requirement on short sales of some shares will force traders to make sure they have located securities before putting on negative bets. That may limit the pressure on the stocks included in the emergency order.
posted
i beleive we may see this dirty little secret get blown wide open in the next few weeks...
as recently as two years ago? the DTCC publicly denied the existence of this "problem" completely.
interviews on CNBC just a few minutes ago revealed that the prime culprit (as i have suspected since '05) is the large brokerages themselves because they have kept the "window open" for their biggest and best "industrial strength" customers. now that the brokerage houses are under the same assault? they are going to "fix" the problem?
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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quote:Originally posted by glassman: Cramer is now lambasting COX for being WRONG.
and i agree. the SEC is being run by CRIMINALS who can't even read the laws they write themselves...
it's time to IMPEACH BUSH NOW!
Wow, that's about as emphatic as I've seen you about the idiot. Of course you know it won't happen. Of course you know the next idiot to sit in that chair will be just as bad... whether perceived or not.
Posts: 2965 | Registered: Aug 2005
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i cannot believe how incompetent everybody in this admin is...
if incompetency isn't a high crime? it's at least a misdemeanor... listening to Cox today? i was struck just how much it was like listening to Bush give one of his little press conferences...
there idiots have just about ruined our country.
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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quote:Originally posted by Relentless.: It is not incompetence.. you and I both know that.
what we know and what we can prove are two different things...
and we can't prove anything cuz every time congress calls them to investigate? the bozo's claim executive privilege.
Congress is charged by the constitution with investigating and there's no exective privilege. congress needs to impeach solely based on the claim of executive privilige
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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posted
Which brings us back to one of my more recent(last couple of years) points: They are all on the same side.
Posts: 2965 | Registered: Aug 2005
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posted
Just wait to see all the repealed legislation once Bush, the omnipotent political power that he is, leaves office. You won't see one bit. Because: All together now... They are all in on it together.
Posts: 2965 | Registered: Aug 2005
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posted
Yup, interesting times we live in. We can most assuredly rule out citizens overruling or even effectively protesting the ongoing and coming actions. Just how far down are our supreme lords going to take it? When precisely? Interesting times.
Posts: 2965 | Registered: Aug 2005
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posted
i heard an interview the other day of a US Congressman from NM that went home over the 4th celebration. he went to a parade or two and was accosted by quite a few people telling him that if oil prices stay high? the trouble will begin... he said one person IDed himself as an Iraq Vet and specifically said there'll be a revolution if gas prices keep going up...
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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posted
op-ed by SEC Chairman Naked Short Selling Is One Problem A Slumping Market Shouldn't Have BY CHRISTOPHER COX
Posted 7/17/2008
Many people think naked short selling is already illegal, but that isn't true. Shares are normally delivered to the buyers within three days of the trade. But in most stocks, including those covered by our emergency order, that three-day period can be extended indefinitely.
Even without these extensions, and even when a short seller locates shares that can be borrowed, there can be problems because the short seller is not currently required to actually borrow those shares until settlement.
two-three years ago, the DTCC and other SRO's denied the very existence of NSing...
then they "spoke up" and told us that ONLY MM's/broker dealers are allowed to do it...
C. How does short selling work?
Typically, when you sell short, your brokerage firm loans you the stock. The stock you borrow comes from either the firm's own inventory, the margin account of other brokerage firm clients, or another lender. http://www.sec.gov/spotlight/keyregshoissues.htm
somehow? the SEC decided that not everybody has to actually BORROW the stock.
as Cox stated, and the SEC info site states? some players only have to In a "naked" short sale, the seller does not borrow or arrange to borrow the securities in time to make delivery to the buyer within the standard three-day settlement period.
Regulation SHO requires a broker-dealer to have reasonable grounds to believe that the security can be borrowed so that it can be delivered on the date delivery is due before effecting a short sale order in any equity security.6 This "locate" must be made and documented prior to effecting the short sale.
basically? this set of rules took the power of the markets away from every day traders or investors, and gave the deepest pockets the right to steal.
want to see the markets give a more steady return to everyday investors?
write a letter to your Senators and Congresspersons demanding that EVERYBODY be required to borrow the shares they are going to short not just us "little guys".
it isn't much to ask fro; a level playing field.
does locating shares incurr charges? borrowing shares does... if locating shares is free? then theres not much reason to worry if you are a short-seller who is prepared to just keep shorting till you have forced the price down. in large Caps? that's not likely, but in small caps? it doesn't take much money to do it.
one of the large "reservoirs" for the "locatable" stocks is "managed accounts" typically? a managed account holder is a person trying to avoid paying short term capital gains taxes. The "account managers" are told to buy and hold for at least one year. This allows the account managers to feel relatively secure because they can buy and hold the shares long enough to "locate" for the their short-sellers..
of course the short-sellers are there to chip away at the long term holders profits...
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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posted
oh well. it was just a joke: SEC May Ease `Naked-Short' Sale Ban for Market Makers (Update1)
By Jesse Westbrook and Edgar Ortega
July 18 (Bloomberg) -- The U.S. Securities and Exchange Commission is poised to exempt market makers in stocks from an emergency rule aimed at preventing manipulation in shares of Fannie Mae, Freddie Mac and 17 Wall Street firms.
The agency staff, after conference calls discussing the rule that limits the ability of traders to use abusive tactics when betting on a drop in share prices, agreed to requests from exchanges and brokerages. Exchange officials told regulators that without an exemption, market makers in equities and options responsible for pairing off investor orders would struggle to keep transactions flowing and may raise costs for investors.
The staff recommended exceptions from the requirement to borrow shares in advance of a short sale ``to avoid constraining the market makers' provision of liquidity,'' SEC spokesman John Nester said in an e-mail from Washington. The full commission may vote as soon as today
posted
SEC Spares Market Makers From `Naked-Short' Sales Ban (Update1)
By Edgar Ortega
July 18 (Bloomberg) -- The U.S. Securities and Exchange Commission exempted market makers in stocks from the emergency rule aimed at preventing manipulation in shares of Fannie Mae, Freddie Mac and 17 Wall Street firms.
The SEC granted relief for equity and option traders responsible for pairing off orders from a rule that seeks to bar the use of abusive tactics when betting on a drop in share prices. Exchange officials said limits on ``naked-short'' sales would inhibit the flow of transactions and raise costs for investors.
``The purpose of this accommodation is to permit market makers to facilitate customer orders in a fast-moving market,'' the SEC said in the amendment.
SEC Commissioner Christopher Cox announced the order July 15 to make it harder for traders to illegally drive down stocks of the two mortgage buyers and Wall Street firms and prevent another collapse like Bear Stearns Cos. The rule takes effect July 21 and expires at the end of July 29. It may be extended for a total of 30 calendar days.
The SEC also exempted some transactions by underwriters arranging sales of additional shares for the 19 companies that are covered, as well as brokers participating in syndicates to arrange offerings.
``We appreciate the SEC's prompt action,'' said Gary Katz, chief executive officer of the International Securities Exchange, which trades stocks and options. ``The SEC has taken a positive step to minimize impact on the options market and its use as an important risk management tool in times of market uncertainty and volatility.''
Sifma
The exemption is ``essential for separating legitimate market makers from those who may try to act illegally,'' said Ira Hammerman, senior managing director of the Securities Industry and Financial Markets Association, Wall Street's largest lobbying group.
Investors will be required to borrow shares that they plan to sell short when they bet a stock will decline in price. Prior to the order, investors were only required to locate shares that they had reason to believe were available for borrowing.
Market makers must quote bids to buy and offers to sell shares or options contacts on their assigned stocks. Securities exchanges sought exemption for the market makers, who rely on quickly shorting stocks to hedge their trades. They still must obtain the loan by the time the transaction is settled.
In a short sale, an investor borrows and then sells the shares in anticipation of a price decline. If the trade works as planned, the investor is able to buy back the stock at a lower cost and return the shares to the lender, pocketing the difference as profit.
Traders are sometimes unable to actually borrow the shares and complete a ``naked-short'' sale. If the loaned shares are never repaid, investors can sell more shares short than legally allowed and put pressure on a stocks' price.
To contact the reporter on this story: Edgar Ortega in New York at ebarrales*bloomberg.net.
Last Updated: July 18, 2008
Posts: 3255 | From: Los Angeles California | Registered: Jan 2006
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What a reversal from NSS doesn't exist to now admitting that it not only does exist but that the SEC, despite their rules condones it.
I guess you might consider the stance the other day as a bit of foreplay before they bent us over but..................
In my book they have now come out and stated publicly that it's OK to steal money from the small investor. Money talks, right.
Posts: 3255 | From: Los Angeles California | Registered: Jan 2006
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posted
It's so much BS. They in essence have legalized GRAND THEFT.
Take form the masses and give to the wealthy.
Well, at least they have made a public stance now. I wonder what would happen if all retail investors got together and sold their holdings on the same day in protest.
Do you think it might get their attention?
Posts: 3255 | From: Los Angeles California | Registered: Jan 2006
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posted
i figure they got nervous when people actaully began to be able to make THEIR money... the internet made it easy to read charts and get news as fast as them...
their (the MM's) response was to stop trying to do DD themselves and just make the trades..
now? the MM's are in a position where they lose money to the traders when they NS, so they HAVE no choice but to keep shorting and the price CAN'T go up or they'll be broke. if they'd just play the spreads? the market would work... hold the spreads wider? that should be their profit..
problem is? the MM's compete against each other too...
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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posted
The SEC granted relief for equity and option traders responsible for pairing off orders from a rule that seeks to bar the use of abusive tactics when betting on a drop in share prices. Exchange officials said limits on ``naked-short'' sales would inhibit the flow of transactions and raise costs for investors.
``The purpose of this accommodation is to permit market makers to facilitate customer orders in a fast-moving market,'' the SEC said in the amendment.
IF? an MM has to NS (or even legitimately short) a stock? how do they make their money back on good news? since, a short sale, by definition, is betting the stock will go lower?
the stock price has to go down OR they have to make a whole lot of really good trades with huge spread...
why is this so complicated? it is just common sense that NOBODY should be NSing...
how can they make money on GOOD small cap co's if they are shorting to create liquidity?
the way i see it? the markets can't work this way, unless the only goal is to drive down the price of ANY stock that has too much volume...
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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posted
Glassman I agree with you. The economy would be much better off if small cap companies were allowed to capitalize and create jobs but common sense is thrown out the window when campaigns to get into office are as high as they currently are.
Therefore politicians will make concessions in order to get elected.
I still think a third party will help.
Posts: 3255 | From: Los Angeles California | Registered: Jan 2006
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posted
who knows anymore Peaz. IMO? credit has been too easy for everybody. shorting is supposed to be borrowing, and they weren't even bothering to actually borrow the stock anymore. i hope it was a sort of a suggestion to the market that they need to get their bookeeping in order...
the question seems to revolve around when a short actually becomes Naked.
say you are a real daytrader and you are closing out your positions at the end of the day? the shorts are naked, but the settlement day is three days away, so it's not really an "official" naked short cuz a settlement delivery never has to actually happen?
i think they've been allowing this for awhile now, and the net effect is that MOST of the NS trades never really show up by some creative bookepping. in relity? the shares daytraded are phontms, it only becomes a problem when too many do it at one time and the postitons get held for along time.. shorters that hold have to pay extra fees tho...
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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posted
Yup, it would be nice to know the true O/S of these companies, counterfeits included.
I wonder how accurate the SHO list really is.
If brokerages aren't held accountable, who's to say what the O/S is with any company due to counterfeit's on the market.
This could temporarily bring down the entire stock market in time, when and if anything is ever done. Finding the true O/S could take months/years to figure out. Or it at least could bankrupt some brokerage houses, due to their activities in this illegal activity.
Cox plays it off as the SHO list is full proof. Is it?
The big boards seem to be no better regulated than the OTCBB's.
-------------------- Buy Low. Sell High. Posts: 10755 | From: The Land Of The Giants | Registered: Feb 2005
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posted
If I buy and sell on the same day, whether short or long, don't they in effect cancel each other out?
I mean it's like a revolving door. Shoot if I'm a day trader on voltile stocks, I might be in and out of the same stock 4 or 5 times, maybe even more in the same day. How can that even be accounted for? I mean it supposedly takes 3 days for the trade to clear so the stock that I buy won't show up for 3 days but I already sold it so how can the broker cover the sells if they also need to be in another account on the same day?
There is no way the SHO list is full proof.
Peaser by the time you could figure out what the true O/S is it would already be outdated.
Posts: 3255 | From: Los Angeles California | Registered: Jan 2006
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it APPEARS to me that the brokers can settle between themselves on the highly liquid stocks to avoid the embarassment of having highly liquid stocks appear on the SHO...
the illiquid small caps that the brokers do not want to own themselves? they go on the SHO list all the time...
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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posted
it APPEARS to me that the brokers can settle between themselves on the highly liquid stocks to avoid the embarassment of having highly liquid stocks appear on the SHO...
reminds me of Wimpy. I'll gladly pay you Tuesday for a Hamburger today.
the illiquid small caps that the brokers do not want to own themselves? they go on the SHO list all the time...
Yep they go on the SHO but they also stay there. The SEC doesn't care. How can some stocks have FTD's for 100's of days in a row? Of course it's lack of enforcement.
Posts: 3255 | From: Los Angeles California | Registered: Jan 2006
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posted
Former SEC head wants broader short-selling rules
By Martha Graybow
NEW YORK, July 21 (Reuters) - Emergency action by U.S. regulators to rein in abusive short-selling in some large financial firms should be expanded to include the stocks of all public companies, a former top markets watchdog said on Monday.
Former U.S. Securities and Exchange Chairman Harvey Pitt said the SEC's emergency order that went into effect on Monday would help in "restoring legitimacy" to short-selling activity but should go even further.
"It's something that is very good of the SEC to have done," he told Reuters in an interview. "They can't do it across the board without going through formal rule making, but I do believe that they need to expedite that."
The SEC last week announced an emergency measure applying to stocks of 17 Wall Street firms, as well as U.S. housing finance companies Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) as a way to curb manipulative short selling. The emergency action can last up to 30 days.
The commission's move has drawn complaints, including from the banking industry, which wants the protections extended to all banking companies. The SEC has said it will consider rules to address short-selling issues across the entire stock market.
"Any cut less than the whole is going to be perceived ultimately as arbitrary," said Pitt, now head of financial consultant Kalorama Partners in Washington. "My own view is they couldn't do all of the public companies in one fell swoop. They made what appears to me to be a reasonable cut, and hopefully they will expand it across the board just as quickly as they are able to do it."
Short sellers borrow shares they think are poised to drop in price and then sell them, hoping the stock will fall and can be repurchased at a profit. A "naked" short occurs when an investor sells stock that has not yet been borrowed.
Under the emergency rule, a short seller must borrow the securities before executing the short sale. It also requires the investor to deliver the securities on the settlement date.
Pitt, who was SEC chairman from 2001 to 2003, said that after the Sept. 11, 2001 attacks roiled financial markets, many companies urged the commission to outlaw short selling entirely. But he said the practice is ultimately helpful to ensuring markets run properly.
"Short selling provides extra liquidity in the market," he said. "The goal isn't to prevent short selling. The goal is to make sure that people who sell short will have the means to settle their trades when they are supposed to be settled." (Editing by Brian Moss)
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