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SEC Intensifies Efforts To Rein In Short Selling
WSJ ^ | 072808 | JENNY STRASBURG, KARA SCANNELL and RANDALL SMITH

Posted on 07/27/2008 10:12:33 PM PDT by Fred

Wall Street executives expect the Securities and Exchange Commission to extend the temporary limits it has placed on short-selling and expand them to cover additional stocks beyond the 19 financial companies it targeted two weeks ago.

The limits are set to expire Tuesday, and executives, lobbyists and hedge-fund representatives of the Managed Funds Association, the biggest hedge-fund industry group, have been talking throughout the weekend, trying to come up with possible approaches to asking the SEC to reconsider expanding the rules, according to people familiar with the talks.

A call with regulators on Friday gave the funds group "a fair degree of certainty" that the SEC intends to seek an extension of the emergency period, these people said. Regulators said an extension could be for as short as 60 days and could involve insurance, housing-industry and a broader range of financial stocks, according to these people. SEC Chairman Christopher Cox indicated last week the rules might be extended to all stocks.

In a short sale, a trader sells borrowed stock in a bet the price will decline and the stock can be profitably repurchased at a lower price. The new rules require specific arrangements to borrow shares in short sales rather than the existing rules, which allow a looser assurance the shares can be located.

The rules appear to have had their intended effect of halting the slide in shares of financial companies such as Fannie Mae, Freddie Mac and Lehman Brothers Holdings Inc. Combined with falling oil prices and encouraging earnings reports from some banks, shares in some of these names have doubled.

(Excerpt) Read more at online.wsj.com ...


TOPICS: Politics/Elections
KEYWORDS: barneyfrank; chriscoxs; chrisdodd; fannie; fanniemae; freddie; freddiemac; govwatch; hedgefunds; mccain; nakedshorts; obama; sec; wallstreet
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1 posted on 07/27/2008 10:12:34 PM PDT by Fred
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To: Fred

The pathetic Chris Cox in action.


2 posted on 07/27/2008 10:20:05 PM PDT by spyone
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To: Fred

The day when the market really takes el dumpo and the shorts have all been chased away....the longs will all be in fetal positions BEGGING for those shorts to cover. And they won’t be there. Then we’ll see that DJIA -1000 down day.


3 posted on 07/27/2008 10:23:13 PM PDT by Attention Surplus Disorder (Congrasites = Congressional parasites.)
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To: Fred

It seems to me that selling long or or selling short is just betting... If it is in the public interest for the government to outlaw betting on football, it is certainly in the public interest to prohibit betting on the market.


4 posted on 07/27/2008 10:26:26 PM PDT by babygene (This Government no longer works to secure our freedoms and provide for our common defense.)
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To: Attention Surplus Disorder
the longs will all be in fetal positions BEGGING for those shorts to cover. And they won’t be there. Then we’ll see that DJIA -1000 down day.

Yes, we will. Who's gonna be the first to post "I told d'ya so"?

5 posted on 07/27/2008 10:26:57 PM PDT by steve86 (Acerbic by nature, not nurture™)
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To: babygene

A suggestion only Chris Cox would love.


6 posted on 07/27/2008 10:29:28 PM PDT by spyone
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To: babygene
Only naked shortselling is finally being enforced, and at this time, only for 19 equities. I suggest it be extended to all equities.
7 posted on 07/27/2008 10:36:00 PM PDT by Fred (The Democrat Party is the Nadir of Nilhilism)
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To: spyone

“A suggestion only Chris Cox would love.”

I don’t know who Chris Cox is, but it seems to me that going out and buying up all the oil at $100 a barrel and selling it at $140 a barrel is not the right thing to do.


8 posted on 07/27/2008 10:37:34 PM PDT by babygene (This Government no longer works to secure our freedoms and provide for our common defense.)
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To: Attention Surplus Disorder

Are you referring to a short squeeze, note, there will still be short selling, the only difference is that the one shorting must have concrete proof of having the access to the number of shares being shorted.


9 posted on 07/27/2008 10:37:55 PM PDT by Fred (The Democrat Party is the Nadir of Nilhilism)
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To: Fred
re-post to 7
I meant a BAN on naked shortselling is being enforced.
10 posted on 07/27/2008 10:39:35 PM PDT by Fred (The Democrat Party is the Nadir of Nilhilism)
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To: steve86
Legitimate hedges are disappearing from the market because of this. The options market makers are SOL in the financial stocks right now. When you can't hedge, look out - everyone's going to get smacked in the face by the volatility. The financials up or down 20% in a week will become the norm, not the exception.


11 posted on 07/27/2008 10:40:52 PM PDT by July 4th
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To: babygene
it seems to me that going out and buying up all the oil at $100 a barrel and selling it at $140 a barrel is not the right thing to do

Welcome to the free market.
12 posted on 07/27/2008 10:42:49 PM PDT by July 4th
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To: July 4th
Legitimate hedges are disappearing from the market because of this.

I agree and many (non-naked) shorts have been scared out even with no legitimate reason. I have heard even puts have diminished. This is truly a recipe for disaster, if that phrase hasn't been used already in this thread.

13 posted on 07/27/2008 10:43:37 PM PDT by steve86 (Acerbic by nature, not nurture™)
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To: Attention Surplus Disorder

Being merely an agreement to purcase shares {perhaps for more shares than are in existence in the first place}, confidence that hedge fund shorters will provide a floor is somewhat underwhelming.


14 posted on 07/27/2008 10:44:06 PM PDT by nkycincinnatikid
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To: July 4th

“Welcome to the free market.”

It’s more of a free market without speculators. Supply and demand should govern the market, speculators only distort it for their own personal gain.


15 posted on 07/27/2008 10:50:08 PM PDT by babygene (This Government no longer works to secure our freedoms and provide for our common defense.)
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To: Fred

No, I’m not really referring to a short squeeze. If anything, I’m talking about a LONG squeeze.

What I am referring to is that there SHOULD be a nominal balance between longs and shorts in a free market. Many longs feel that shorts are somehow their enemy, as if this was a cheerleading exercise. No, if you’re a long, shorts can be your best friends. When and if markets fall precipitously, one of the things that puts the brakes on is the action of shorts covering. But if the SEC and the Fed successfully conduct this campaign to chase shorts out of the market, those brakes will not be there. Did you know that short selling isn’t even allowed in the Chinese market? And it’s down about 50%.

We really do not have price discovery like there once was in US markets. The markets are dominated by hedge funds and some of the larger banks who, if you think about it, have significantly reduced prospects for making money unless and until the credit markets free up. Witness the trading profits put up by Goldman, Lehman, et al. They are large, larger than ever.

So by the time the Fed will come to the rescue of banks who blew their brains out with stupid loans, to the rescue of FNM/FRE who are mismanaged by homeless politicians and party hacks in patronage positions, and most vigorously to their pals in the major banks, how much a free market is left?


16 posted on 07/27/2008 10:50:16 PM PDT by Attention Surplus Disorder (Congrasites = Congressional parasites.)
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To: steve86

Why would they be scared, just find the stocks and go from there, at this time the no naked shorting only applies to 19 equities....


17 posted on 07/27/2008 10:51:22 PM PDT by Fred (The Democrat Party is the Nadir of Nilhilism)
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To: Attention Surplus Disorder

I hate to keep repeating myself, correct me if I am wrong, BUT ONE CAN STILL SHORT just not naked shorts...


18 posted on 07/27/2008 10:53:22 PM PDT by Fred (The Democrat Party is the Nadir of Nilhilism)
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To: nkycincinnatikid

Is it so underwhelming that it produced the single most violent and widespread short covering rally in stock market history the week before last or is there some other theory you’d care to advance?


19 posted on 07/27/2008 10:53:48 PM PDT by Attention Surplus Disorder (Congrasites = Congressional parasites.)
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To: Fred

I know but they are (scared).


20 posted on 07/27/2008 10:54:25 PM PDT by steve86 (Acerbic by nature, not nurture™)
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To: Attention Surplus Disorder

I know that promises merely to pay a house mortage appear to have fallen by the wayside lately. And the rest of us are being asked to pay up for those speculators.


21 posted on 07/27/2008 10:58:39 PM PDT by nkycincinnatikid
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To: Fred

Yes, you can still short these stocks if you can achieve a legitimate borrow, but many traders I talk to have stated that brokers are declining their short orders altogether or are charging to short. A friend of mine was notified he’d be charged $75 a day to short a few thousand shs of FNM last week. I guess that’s not a lot of money per share, but it’s one of those things that gums up the works for some of my pals who work really fast.


22 posted on 07/27/2008 11:04:30 PM PDT by Attention Surplus Disorder (Congrasites = Congressional parasites.)
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To: nkycincinnatikid

Well, the difference is that a stock short who cannot prove that he legitimately borrowed the shorted shares could suffer a significant SEC fine and also suffer a costly and intrusive SEC investigation into their operations.

I’m with you on the promise to pay a mortgage. Seems to me, the folks who bought a home they could afford and have managed to make the payments timely are being made to be the biggest suckers around.


23 posted on 07/27/2008 11:08:45 PM PDT by Attention Surplus Disorder (Congrasites = Congressional parasites.)
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To: babygene

but it seems to me that going out and buying up all the oil at $100 a barrel and selling it at $140 a barrel is not the right thing to do.”

What??? It’s exactly what business and investing is all about!!!!!! Buy low, sell high.

What is your idea of the “right thing to do”?


24 posted on 07/27/2008 11:20:41 PM PDT by llandres (I'd rather be alive and bankrupt than dead and solvent)
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To: Fred
When and if markets fall precipitously, one of the things that puts the brakes on is the action of shorts covering.

Why would shorts over if the market falls precipitously? Haven't you heard of letting your profits run? Shorts don't cover if the market goes their way, they cover when it moves against them and the want to protect profits. A neophyte might cover if the market is moving his way, but not people that know what they're doing. If the market is moving their way, they're more likely to increase their positions.

Covering when the markets fall precipitously is a taxable event, forcing the shorts to share their profits with the IRS. The great advantage to shorting is when companies go belly-up. Then the shorts never have to cover and nothing gets reported to the IRS so they don't have to pay tax on their profits. Naked shorting is even better, because you don't even need to borrow the shares you';re selling because you';re just selling air, i.e., phantom shares. You can sell multiples of the entire shares outstanding of the company that is being shorted and make huge profits.

In addition, the SEC recently eliminated the up-tick rule for shorting, which had been in place since the great depression. Now you can hit every bid without the inconvenience of waiting for an up-tick and create huge downward pressure and enormous profits when selling those air-shares.

The conditions are ripe for a huge and lasting crash.

25 posted on 07/27/2008 11:20:49 PM PDT by Retief
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To: Attention Surplus Disorder

This is about NAKED shorting. These hedge funds are creating fraud and basically counterfeiting securities when they do not borrw shares they short. It results in excess shares in the market that the company has authorized. THIS FRAUD IS BiGgER THAN THE MORTGAGE MESS!

This action has destroyed thousands of companies. I pray they are serious about this!


26 posted on 07/27/2008 11:24:33 PM PDT by keyser_sose
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To: Attention Surplus Disorder

Seems to me, the folks who bought a home they could afford and have managed to make the payments timely are being made to be the biggest suckers around.”

Yes, once again, yet again. Welcome to the responsible middle class, that world in which no good deed goes unpunished.


27 posted on 07/27/2008 11:29:12 PM PDT by llandres (I'd rather be alive and bankrupt than dead and solvent)
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To: Attention Surplus Disorder
The day when the market really takes el dumpo and the shorts have all been chased away....the longs will all be in fetal positions BEGGING for those shorts to cover. And they won’t be there. Then we’ll see that DJIA -1000 down day.

For some reason, this subject requires some mental gymnastics I've never quite gotten the hang of. If the shorts have been chased away, how can there be longs in the game? I thought every short required a long to make the transaction complete.

28 posted on 07/27/2008 11:35:33 PM PDT by gitmo (From now on, ending a sentence with a preposition is something up with which I will not put.)
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To: spyone

Where was the government agencies when wall street and financials was bankrolling trillions in subprime and alt-a toxic waste? Where was the government yelling for oversight when companies like countrywide, new century, and indymac were dumping all thier billions in toxic waste loans on Freddie Mac, Fannie Mae, Pension funds, and anyone else they could toss the green glowing potato too?
Now they try to scapegoat short sellers AFTER the ponzi scheme finally collapsed.
The short sellers didn’t cause this collapse in financials. They are only profiting off of what had been set in motion for years previously. You could see this coming from a mile away. Its no different than if you were shorting dot com stocks in 2000.

And one more thing Mr. Cox. Good luck with enforcing naked short selling rules. The majority of it is done in foreign countries like Germany and their governments couldn’t give a rip if they naked short our country into extinction. Hedgefund managers laugh at this crap as they naked short away. I’m laughing. What a total joke.


29 posted on 07/27/2008 11:36:15 PM PDT by Proud_USA_Republican (We're going to take things away from you on behalf of the common good. - Hillary Clinton)
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To: Retief

Well said.


30 posted on 07/27/2008 11:39:09 PM PDT by Fred (The Democrat Party is the Nadir of Nilhilism)
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To: babygene
it seems to me that going out and buying up all the oil at $100 a barrel and selling it at $140 a barrel is not the right thing to do.

Is that even possible to do? Nobody can buy up all the oil on the market. And if it is going for $100 a barrel why aren't other people buying it at that price instead of letting someone buy at $100 and sell to them at $140?

31 posted on 07/27/2008 11:40:03 PM PDT by gitmo (From now on, ending a sentence with a preposition is something up with which I will not put.)
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To: Proud_USA_Republican

The investment banks are also bankrolling the naked shorting selling, the hedge dudes borrow huge sums to trade...


32 posted on 07/27/2008 11:43:31 PM PDT by Fred (The Democrat Party is the Nadir of Nilhilism)
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To: Fred

Help me understand Naked Shorts. (Sounds like a David Zucker film to me.)

The link you gave earlier says, “The illegal practice of short selling shares that have not been affirmatively determined to exist. “ If they don’t exist, how in the world does that affect the price of oil? And who turns around and purchases their non-existent shares? And why?


33 posted on 07/27/2008 11:44:37 PM PDT by gitmo (From now on, ending a sentence with a preposition is something up with which I will not put.)
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To: llandres

“What is your idea of the “right thing to do”?”

Suppose your kid has diabetes. You REALY have to have insulin for your kid. Your problem is that I bought all the manufacturer could make for the foreseeable future (he has a patent and nobody else can make it) and I want to charge you 1000 times the price.

It’s a free market right? Quit complaining, just pay my price and your kid can live...

You tell me. What is the right thing to do?


34 posted on 07/27/2008 11:46:11 PM PDT by babygene (This Government no longer works to secure our freedoms and provide for our common defense.)
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To: gitmo

“I thought every short required a long to make the transaction complete.”

True. When you buy a share of stock, atleast on the NYSE or AMEX, you are buying from a/the market maker, who shorted (sold) it to you. You cannot conduct a transaction directly with a “short”, eg; a retail someone who is bearish on a stock who goes out and through the action of entering a short-sell order on said stock becomes short the stock. That’s the long-short symmetry. But the difference is that the market maker maintains a hedged position on VAST majority of the shares he owns and will not take much market risk. So, after he sells you your share on which you are now long, he looks at his holdings and decides whether his net long or short position is within his risk tolerance. That is...if he wants to stay in business. He will take very moderate directional risk but prefers to make money on the bid/ask spread thousands or hundreds of thousands or millions of times a day. If your order to buy makes him shorter than he cares to be, he will buy calls and increase his long position, and the same is true in reverse.


35 posted on 07/27/2008 11:55:31 PM PDT by Attention Surplus Disorder (Congrasites = Congressional parasites.)
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To: gitmo

“Is that even possible to do? Nobody can buy up all the oil on the market.”

You wouldn’t have to buy it all. Just enough to effect the supply. Saudi Arabia pumps it out of the ground for $3 a barrel and it gets bought and sold 80 times before you get any for your car.


36 posted on 07/27/2008 11:57:41 PM PDT by babygene (This Government no longer works to secure our freedoms and provide for our common defense.)
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To: Attention Surplus Disorder
"True. When you buy a share of stock, atleast on the NYSE or AMEX, you are buying from a/the market maker, who shorted (sold) it to you. You cannot conduct a transaction directly with a “short”, eg; a retail someone who is bearish on a stock who goes out and through the action of entering a short-sell order on said stock becomes short the stock. That’s the long-short symmetry. But the difference is that the market maker maintains a hedged position on VAST majority of the shares he owns and will not take much market risk. So, after he sells you your share on which you are now long, he looks at his holdings and decides whether his net long or short position is within his risk tolerance. That is...if he wants to stay in business. He will take very moderate directional risk but prefers to make money on the bid/ask spread thousands or hundreds of thousands or millions of times a day. If your order to buy makes him shorter than he cares to be, he will buy calls and increase his long position, and the same is true in reverse."


37 posted on 07/28/2008 12:08:17 AM PDT by rednesss (Fred Thompson - 2008)
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To: gitmo
A solid read on what is going on regarding naked shorts

Government Ban on Naked Short Selling in 19 Financials Created the Greatest Short Squeeze of All Time

Currently, the new enforcement is being applied to financial equities Bank of America, Goldman Sachs (why???), etc...
38 posted on 07/28/2008 12:12:24 AM PDT by Fred (The Democrat Party is the Nadir of Nilhilism)
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To: babygene
Supply and demand should govern the market, speculators only distort it for their own personal gain.

They have as much right to be in the market as anyone else. Who do you think takes the other side of the speculators' trades? Sometimes it's an airline, or a cargo ship operator...
39 posted on 07/28/2008 12:17:47 AM PDT by July 4th
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To: Retief
When and if markets fall precipitously, one of the things that puts the brakes on is the action of shorts covering.

Why would shorts cover if the market falls precipitously?

Let me assure you, that any short who has overstayed his very brief welcome over the past five years has seen his profits evaporated in mere minutes.

Haven't you heard of letting your profits run? Shorts don't cover if the market goes their way, they cover when it moves against them and the want to protect profits. A neophyte might cover if the market is moving his way, but not people that know what they're doing. If the market is moving their way, they're more likely to increase their positions.

Disagree. First, I don't think you can characterize things so generally. But only the most skilled and well capitalized shorts can really follow a stock to the very bottom. No trader I know sticks around short for any significant time in this market, and the ones who have have been destroyed over the past five years. Over and over, I have seen the market recover violently no matter how rotten earnings have been. And I mean, to a man, every trader I know and I talk to a few dozen, are very very skittish.

Covering when the markets fall precipitously is a taxable event, forcing the shorts to share their profits with the IRS.

ALL short sales are short term gains by IRS definition, regardless of the holding period. IF you hold a short position over a year-change, there is a special treatment that is recommended, and you can defer the gain into the next tax year, but overall the transaction is subj to ST treatment.

The great advantage to shorting is when companies go belly-up. Then the shorts never have to cover and nothing gets reported to the IRS so they don't have to pay tax on their profits.

I read that too just recently on Puplava's site, and it is flat out false. Gains from a short sale are due when a stock becomes worthless, cover or not, and are always ST gains regardles of holding period. Think about it. If I short a put or a call and the put expires worthless, I never cover, right? Think the IRS will let get away with collecting the premium tax free? Nope.

Naked shorting is even better, because you don't even need to borrow the shares you';re selling because you';re just selling air, i.e., phantom shares. You can sell multiples of the entire shares outstanding of the company that is being shorted and make huge profits.

True.

In addition, the SEC recently eliminated the up-tick rule for shorting, which had been in place since the great depression. Now you can hit every bid without the inconvenience of waiting for an up-tick and create huge downward pressure and enormous profits when selling those air-shares.

Also true. IMO.

The conditions are ripe for a huge and lasting crash.

In a free market, I'd agree. But we don't have that.

40 posted on 07/28/2008 12:20:09 AM PDT by Attention Surplus Disorder (Congrasites = Congressional parasites.)
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To: Fred

The gov’t is ramping out lie after lie. Up until 2 weeks ago the SEC was denying naked short selling was even an issue and refused to investigate it. Then the market in financials tanked and naked shorts are the scapegoat. The cause isn’t naked short selling, which should be eliminated, and has been(a la the 25% financial rally). The issue is there are gobs of financials that are insolvent...from small ones to big ones...Washinton Mutual, Wachovia, Lehman Bros, Fannie, Freddie etc. etc. Now, stock cannot be borrowed to short...why? Cuz Goldman, Morgan Stanley, and every other big brokerage are short. If you ask to borrow stock to short, they won’t lend any to you, because they’re doing the shorting. You’ll never hear this in any congressional hearing. I agree that the market is poised for a possible major decline.


41 posted on 07/28/2008 12:26:20 AM PDT by spyone
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To: gitmo

A typical naked short sale scenerio on these exchanges will be:

When investors call a broker to arrange to borrow stock to short, they are aware that short sales are subject to a standard three-day settlement period. This means the sell-side broker has three days to deliver the shares to the investor.

The broker is supposed to locate shares available to short prior to executing a short sale and make a determination that the shares will be delivered to the investor within the three- day settlement window. However, there are certain exceptions to that rule.

Some shares are on an “Easy to Borrow” list. For a stock on that list, investors can execute a short sale and the broker does not specifically have to locate, or contact the source of the shares that are being shorted. The broker has a “blanket” assurance about the borrowing capability for that security.

The naked short seller will sell the stock and then buy it back quickly before the two-day window closes. That way, there’s never a need to deliver the securities or prove they were available.

You get enough people with deep financial resources to cordinate such heavy naked short selling and a heavy increase in volitility, volume, and dramatic swings in stock prices can occur almost instantly.

They are in, and then out very quickly. Rinse, lather, repeat. They don’t sit around with the same positions for weeks or months.

The emergency rule from the U.S. Securities and Exchange Commission would require a short seller to borrow securities before executing a short sale for certain financial institutions. It would also require the investor to deliver the securities by the settlement date.


42 posted on 07/28/2008 12:27:36 AM PDT by Proud_USA_Republican (We're going to take things away from you on behalf of the common good. - Hillary Clinton)
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To: gitmo
This is a really good article on the oil futures and how they are traded and purchased. Alas it is from WAPO, yuck, best I can find for now

Transparency Sought as Speculators' Activity in Oil Market Grows

The approach on how to deal with "speculators" in oil futures is different from the financial equities. This is where congress can really F things up and make gas even more expensive.

IMHO - The oil problem is supply and demand, something that the likes of Reid, BO and Pelosi refuse to admit and instead want to go on witch hunts.
43 posted on 07/28/2008 12:27:38 AM PDT by Fred (The Democrat Party is the Nadir of Nilhilism)
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To: Fred

Selling stocks short is close to being a basic right. It is a simple outgrowth of stock ownership and the right of individuals to contract with one another.

The public has no legitimate interest in preventing short selling. Of course, that has not prevented our intrusive, overreaching, moronic, self-righteous, impudent government from interfering in the past.


44 posted on 07/28/2008 12:33:09 AM PDT by Tax Government (Government-funded education, for the most part, is content to make morons of us all.)
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To: gitmo

“Help me understand Naked Shorts.”

Watch: http://www.deepcapturethemovie.com/


45 posted on 07/28/2008 12:33:33 AM PDT by Attention Surplus Disorder (Congrasites = Congressional parasites.)
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To: Attention Surplus Disorder

It’s not about stopping short selling, it is about ensuring that short sellers

1) have a bona-fide borrow
2) have a T+3 settlement (preferably, imho, a pre-borrow/pre-settle)
2) are not re-shorting shares already borrowed and shorted

To allow short sellers to sell into a market without a real and unique borrow is tantamount to market fraud because it increases the supply of “shares” (which they are actually not, they are ‘share entitlements’ which are not registered securities according to the letter of the law). Economics 101 teaches that the result of increased supply of a commondity without a commensurate increase in demand usually results in a declining price. So as long as the shorts do not cover, or settle their borrow, or do not secure bona-fide and unique borrows, they succeed in creating inflation for ‘shares’ in the which in almost every case results in devaluation of the stock price.


46 posted on 07/28/2008 12:42:48 AM PDT by monkeyshine
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To: Tax Government

Short sell is a really good thing, I do not think anyone disagrees with this... As said over and over and over again on this post, it is NAKED SHORT SELLING that is the problem...
In fact, NORMAL SHORTING has been show to be a stabilizing factor in futures...


47 posted on 07/28/2008 12:44:22 AM PDT by Fred (The Democrat Party is the Nadir of Nilhilism)
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To: gitmo

http://www.businessjive.com/nss/darkside.html

This is a little more direct about naked short seling....but I couldn’t get the site to load just now when I tried it. But it is EXCELLENT.


48 posted on 07/28/2008 12:47:37 AM PDT by Attention Surplus Disorder (Congrasites = Congressional parasites.)
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To: monkeyshine

Oh, I absolutely agree. Naked shorting is without any question an insider gaming of the system that is destructive to everything it touches except for the perps.


49 posted on 07/28/2008 12:48:59 AM PDT by Attention Surplus Disorder (Congrasites = Congressional parasites.)
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To: Attention Surplus Disorder
But only the most skilled and well capitalized shorts can really follow a stock to the very bottom. Who do you think is doing the naked shorting? Joe Sixpack with his six-figure account? No trader I know sticks around short for any significant time in this market, and the ones who have have been destroyed over the past five years.

You obviously don't know Chanos and his recently purchased US Congressman Richard Baker that he hired away mid-term as the Chairmam of the House Financial Services Committee on Capital Markets to lobby for hedge-fund swine. Chanos also kept also housed a high-price whore that serviced Eliot Spitzer.

Google him. While you're at hit, google Stephen Cohen, Marc Cohodes and David Rocker as well and see deepcapture.com

Gains from a short sale are due when a stock becomes worthless, cover or not, and are always ST gains regardles of holding period.

It doesn't matter what the law says. Billion dollar hedge funds are above the law. That's why John Mack is walking around free instead of doing time for insider trading and Gary Aguirre was fired from the SEC.

Shorting with no intention of delivering the shares from T+3 is already illegal under the 1934 Securities act.

If I short a put or a call and the put expires worthless, I never cover, right? Think the IRS will let get away with collecting the premium tax free?

Not the same. The bankrupt companies usually end up on the pink sheets and trade OTC as penny stocks, which the hedge funds continue to report as a short position and don't pay tax on.

That's one of the sources of the huge systemic risk. If the SEC required all of the naked-shorts to cover, there isn't enough money remaining in the system to cover all of the naked short shares at even pennies on the dollars. It's all been used to buy mansions in the hamptons, private jets, porsches, high-priced whores, and government officials.

You think hedge funds follow the law and don't cheat the IRS? Google UBS and see why they're in so much trouble. Not only does UBS break the law, but they have the audacity to help other rich Americans hide income from the IRS.

50 posted on 07/28/2008 12:54:31 AM PDT by Retief
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