AND NEWS ON IT:

NASD Tightens Short Selling/Delivery Rule
DJN: =DJ IN THE MONEY: NASD Tightens Short Selling/Delivery Rule

By Carol S. Remond
A Dow Jones Newswires Column

NEW YORK (Dow Jones)--Taking most market participants by surprise, the
National Associations of Securities Dealers has drastically tightened one of
its rules governing short selling.
Known as affirmative determination, the NASD rule stipulates that brokers
and dealers engaged in a short sale transaction must make sure that shares
can be delivered by settlement time, three days later.
"We closed a loophole," said Steve Luparello, executive vice president of
Market Regulation at NASD.
Until now, non-NASD members, like specialists, option markets and foreign
brokers, weren't covered under the affirmative determination rule. That
means that non-NASD members didn't have to represent to the NASD broker
through which they conducted a short sale order that they would be able to
deliver the stock by settlement date.
A short seller typically borrows stock from a broker to sell it into the
market, betting that the share price will fall so that he can buy the stock
back at a lower price and pocket the difference.
The amended NASD affirmative determination rule, which was recently approved
by the Securities and Exchange Commission, will particularly affect short
sales conducted through foreign brokers, most specifically Canadian brokers
which have often been used by investors to sell short the stock of small
U.S. companies trading on the Over-the-counter Bulletin Board or OTCBB.
Because it's often impossible to borrow the shares of companies trading on
the OTCBB, investors and hedge funds looking to take negative bets on these
often-overvalued development-stage companies have traditionally been trading
through Canada where it's not required to borrow stock before selling it
short. The practice is known as naked shorting.
That trading avenue has now been effectively closed.
The new NASD rule doesn't cover Canadian brokers, since most are not members
of the association, instead it makes it the responsibility of U.S. brokers
trading with non-members to make sure that their counterparts will be able
to settle a transaction before completing a short sale.
"It's part of (a broker's) supervisory responsibilities," NASD's Luparello
said, adding that a non-member's previous failures to deliver should be a
good indication of whether or not it will in fact be able to complete the
transaction by the settlement date.
Market makers engaged in bone fide market making activities will continue to
be exempt from affirmative determination.
Luparello said that, unlike a parallel SEC initiative to tighten short
selling rules on the small-cap markets, the new NASD rules did not originate
from worries over mounting failures to deliver stock into the national
clearing system. But Luparello said the amended NASD rule fits nicely with
the new short selling regulations now under consideration by the SEC.
"I think it addresses a gap and (shows) that we, like the SEC, are looking
at a variety of things in this area," Luparello said.
The NASD proposal was first submitted to the SEC in November 2001, well
before alleged abuses of naked shorting became the focal point of a campaign
lead by some OTCBB companies in the U.S that say they have been victimized
by the practice.
While some investors argue that short sellers provide a needed service to
the markets, others have called for the complete abolition of short selling
because of the undue pressure its puts on the shares of companies.
While market participants in the U.S. and abroad are well aware of the new
short selling regulations being put forward by the SEC, known as Regulation
SHO, most said they knew nothing of the NASD's plan before it became final.
"It's taken us by surprise," said Richard Thomas, head of compliance at
Canadian brokerage firm Pacific International.
Although separate from it, the amended NASD rule fits tightly within the
SEC's SHO which is now under review by the SEC staff after a period during
which market participants were invited to comment on it.
As it stands, the new SEC short selling rules will make it easier to short
large-cap stocks since they would do away with the "uptick" rule, which bans
short selling on a stock when the price is falling.
But it when it comes to the small-cap markets, where it's often impossible
to borrow stock, the impact of SHO will be the opposite, making it harder to
short sale stock.
The new SEC rule sets a predetermined level of so-called clearing fails -
cases in which a broker or investor cannot deliver stock within two days
after settlement - which will trigger a 90-day blackout whereby the customer
will not be allowed to short sell that security. That 90-day exemption would
affect trading of U.S. securities in and outside the U.S.
The new NASD affirmative determination rule will take effect on Feb. 20.

(Carol S. Remond is one of four "In The Money" columnists who take a
sophisticated look at the value of companies and their securities and
explores unique trading strategies.)

-By Carol S. Remond; Dow Jones Newswires; 201 938 2074;
carol.remond@dowjones.com

I just advised readers to watch for one
of my hysterical rants on a new NASD rule.

Rip that rule apart, read it with care,
each single sentence. Come to understand
what that rule really does and upon whom
it relies for enforcement.

Like almost all responses I receive from
the SEC, it is a whitewash. It is a political
ploy to draw attention away from corrupt
and criminal Market Makers, headtraders,
brokers, SEC, John Does 1 through 1,000.

In time, I will present my hysterical rant
on this rule and how the big boys over on
Wall Street, this includes NASD and the SEC,
constantly provide new rules which only
enhance and protect unlawful and unethical
by the big boys of Wall Street, including
the corrupt paid off SEC.

For now, who is in charge of NASD and the
SEC? Those in charge, are they drawn from
the American public, or are they well noted
long time big boys of Wall Street with
past favors to pay?

Hmm, what was the severance package pay of
the recently retired SEC head crook?

Purl Gurl

"unlawful and unethical by the big boys...."

Unlawful and unethical "activities" by....

Sorry. I become very agitated when discussing
the big boys of Wall Street and the SEC.

They anger me. They are doing everything
possible to keep all money concentrated
within Wall Street. Your money, my money,
they are trying to and do steal all of it
they can.

They also anger me by making a presumption
all private investors are clueless gits
worthy only of contempt, in a Leona Helmsly
fashion. Hogwash! Mule Manure!

Purl Gurl

Just thought it was some good Saturday reading.....We all know that we live in a world of manipulation that is painfully obvious...but as long as you realize that then you adjust and play the game to your advantage....I know that everytime I put my money in a stock there is somebody that has control of my interest...I do not have the home field advantage so I play accordingly.
In my opinion there is the same chance you take with every stock no matter how much research you do unless you are sittimg on that board you have no control of what is to happen on Monday morning.You cannot control the big boys but if they let you play in their world then you must learn how to take advantage of it.In my world of investing there are very few bad stocks just ones that I may have paid too much for but when you buy them right and sell them right that to me is a good stock...I have no faith in any of them doing the right thing by their shareholders so I do not fall in love with any of them nor do I believe they are their for my benefit.

TRSTURGUT-18

Yes, your posted article is good reading
and all are prudent to keep up on news
of this type. Many won't, so it is good
of you to bring news, here. You are doing
a good deed for all.

I think of the stock market as a one big
"Fraud Game" which is about all it is.

Problem I have is all these new rules which
are designed and aimed at harming private
investors to maintain Wall Street advantage,
in the deceitful name of protecting private
investors.

Brokers, the SEC, Wall Street, they are all
just a bunch of unethical crooks taking care
of their own personal greed, at our cost.

Have a look at VASO stock. Investors lost
millions on this to Market Makers. This is
what happened. News is released, which is
dishonest in nature, hyping up investors.
Before the bell, Market Makers jack prices
up to well over two bucks a share.

Bell rings, investors start buying like
crazy because they think a price break out
is in the makings. It isn't. Maker Markets,
working together, a RICO violation, ran
prices up before the bell, a time when
private investors cannot trade.

At market close, prices dropped to well
less than two dollars a share. Instant
loss for investors. Next day or two, a
bad 10Q comes out, lots of money loss.

I warned people about this over on the
"Free For All" board before these events
took place. Hopefully some avoided being
ripped off by Wall Street.

There you are, another "rule" which gives
clear advantage to brokers and to Wall Street,
a rule which allows Wall Street to continue
ripping people off; no trading before the
morning bell for average private investors.

Who is responsible for aiding and abetting
Wall Street in these crimes? The SEC.

Lightning bolts are my true passion!!!