The Authoritative NSS Page (NAKED)

[GnomeOfZurich]

I think it's funny that whenever a stock is on a FTD list, somehow people claim naked shorts and the whole theory of a MOASS or whatever they call it starts to happen.

I also think it's funny that the biggest scams are always on top of the FTD list.

I also think it's funnier when the sheeple call the CEO and ask why the stock is down and the CEO replies it's being shorted or naked shorted by the evil bashers.

I also think it's the funniest when the sheeple believe that and preach it on the message boards while the CEO continues to dump his preferred convertible into the market place. Or you can dump unregisterd shares which pops up on the FTD list.

[GnomeOfZurich]

lol.

Janice,

I did read the post before it got deleted on what you said about the SEC, and others blah blah...

You must of been pretty upset when you wrote it.

Was it ignorance?

You seem to know alot more then your average investor on here, that's why the post surprised me a little.

[Stock]

He promoted that with a paid press release. Doesn't mention the Gary Weiss article about him on Weiss' blog.

The SEC vs Goldman Sachs, With Securities Fraud Specialist Wes Christian on 'Tim Connolly's Winning Strategies' April 23, 2010 at 9:00 a.m. ET

http://www.prnewswire.com/news-releases/the-sec-vs-goldman-sachs-with-securities-fraud-specialist-wes-christian-on-tim-connollys-winning-strategies-april-23-2010-at-900-am-et-91831754.html

HOUSTON, April 22 /PRNewswire/ -- The newly filed civil fraud case of the SEC against Goldman Sachs will be featured on Tim Connolly's Winning Strategies this Friday at 9 am ET. Wes Christian, www.csj-law.com, is a nationally known securities fraud specialist and close associate of legendary trial attorney John O'Quinn, who jointly pursued stock fraud cases with Mr. Christian for many years before his tragic death in an automobile accident in 2009. Wes Christian will discuss his opinion of the likelihood of the SEC prevailing, the standards for upholding a claim of securities fraud, and the likelihood of further lawsuits being filed based on the SEC claims against Goldman Sachs. Call in live and toll free with questions at 800-336-2225, listen live at www.winningstrategies.net or email during the show to [e-mail].

Previous guests of Tim Connolly's Winning Strategies (formerly Corporate Strategies) have included former SEC Chairman Arthur Levitt, Changewave's Tobin Smith, CNBC "Mad Money" Host Jim Cramer, Gamco's Mario Gabelli, Muriel Siebert, U.S. Senator and Presidential Candidate John McCain, Enterprise Products CEO Dan Duncan, Celgene's CEO John Jackson, Landry's CEO Tilman Fertitta, former Compaq CEO Eckard Pfeiffer, Money Manager Louis Navellier, and many others.

About Wes Christian

Mr. Christian has devoted a majority of his practice to complex commercial litigation, including several substantial cases involving, among others, intellectual property, wrongful death, medical malpractice, fraud in real estate. In the last five years, Wes has led a consortium comprised of a number of distinguished law firms across the country pursuing several leading brokerage and clearing firms in six states (in state and federal court) for stock fraud and manipulation, seeking in excess of $9 billion in damage.

Mr. Christian has been featured in the following articles:

Christopher Faille, Christian Reflects on Mangan, Gryphon, HEDGEWORLD.com, Jan. 9, 2008
John R. Emschwiller and Kara Scannell, Blame the 'Stock Vault'? Clearinghouse Faulted On Short-Selling Abuse; Finding the Naked Truth, NY SUN, Jul 5, 2007
Liz Moyer, Naked Short Victim Strikes Back, FORBES.com, Feb. 2, 2007
Kara Scannell, 'Not MY Stock': The Latest Way to Fight Shorts, THE WALL STREET JOURNAL, Aug. 2, 2006
The Economist Staff, Betting on losers, THE ECONOMIST, Jun 22nd 2006
Jane Sassen, The Secret Lives of Short Sellers: the Rise of Hedge Funds and Indie Research Raises New Questions About a Shadowy World, BUSINESS WEEK, Apr. 10, 2006
Daniel Kadlec, Watch Out, They Bite! How Hedge Funds Tied to Embattled Broker Refco Used "Naked Short Selling" to Plunder Small Companies, TIME, Nov. 14, 2005 (SPECIAL ISSUE: INSIDE BUSINESS, December 2005)

About Winning Strategies

Tim Connolly's Winning Strategies (www.winningstrategies.net), formerly known as Corporate Strategies, is a network of financial news resources that provides you with the Low-Risk, High-Reward Strategies for Success necessary to succeed in today's fast-changing, competitive investment and business environment.

Winning Strategies shares the latest news, information, analysis and market intelligence with you through a unique and powerful combination of approaches including:

Tim Connolly's Winning Strategies Business Talk Show
Winning Strategies Newsletters and Strategic Intelligence Updates
Winning Strategies Video Updates
Winning Strategies Subscriber Emails, Blogs and Twitter updates

For more information on booking of interviews, call Marcy Dorotik at 713-621-2737 or email [e-mail].

SOURCE Corporate Strategies, Inc.

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Friday, September 04, 2009
'Renowned Attorney' Wes Christian Smacked Down in Baloney Lawsuit

http://garyweiss.blogspot.com/search/label/Wes%20Christian

One of the earliest of the recent spate of junk lawsuits involving the hobgoblin of "naked short selling" was filed back in 2002, by a company called ATSI Communications. In a press release at the time, the company announced that it had hired the "renowned trial lawyers" of Wes Christian's law firm to bring the suit.

Christian was indeed well reputed at the time (he certainly won "renown" for his share dumping). But he since has supped from the kool aid springs of baloney, filing one "nekkid short selling" lawsuit after another, as well as by representing the nitwits at Overstock.com in their junk suit against Rocker Partners--and getting nowhere.

ATSI said:
The suit alleges that during the relevant time period, the defendants masterminded what has commonly been called a "Death Spiral" funding scheme, and illegally manipulated the stock price through "toxic convertible Toxic Convertible.

Used by companies that are in such bad shape, that there is no other way to get financing. This instrument is similar to a convertible bond, but convertible at a discount to the share price at issuance and for a fixed dollar amount rather than a specific number of " mechanisms and the methodical operation of naked short selling Naked short selling, or naked shorting refers to the practice of selling a stock short without first borrowing the shares or making an "affirmative determination" that the shares can be borrowed. to depress the value of the stock. In the Company's opinion, these actions have resulted in devastating losses to the Company's market capitalization.

The U.S. Second Circuit Court of appeals, in a ruling issued the other day in the ATSI suit, provides a clue as to why he's gotten nowhere with suits like this: because his claims have no merit. The court feels pretty dang strongly that his claim had no merit. It upheld a lower court decision imposing sanctions on him, his partner Gary Jewell, and another lawyer involved in the suit.

The lower court decision found that Christian and his pals "lacked any reasonable factual basis" for suing the principal defendant, Knight Capital Markets, and ordered them to cough up $69,656.69 in fees and costs. The appellate panel agreed, though it sent the case back to the lower court for review of the amount.

The lower court was really teed off. Knight hadn't even asked for monetary damages.

One interesting sidelight: seems that Wes Christian worked hard to keep this penalty out of the public record. As noted in a footnote on page four, Christian and Knight agreed on a settlement that would have vacated the lower court's judgment and short-circuited the appeals process. The judges of the Second Circuit, bless their hearts, would have none of it, observing that "it is precisely to avoid the public's scrutiny of the sanctions that ATSI's counsel seeks vacatur."

The court observed:

We would be hard pressed to conclude that the judgment here, sanctioning lawyers appearing before a United States District Court, is insignificant.
No, it sure ain't. Tough luck, Wes.

I wonder if journalists who have blithely quoted Wes Christian in the past, for articles such as this and this, will continue to swallow his drivel? I'll also be curious to see whether media outlets who picked up the initial press releases, in this and similar suits he's filed, will follow up by reporting the court's decision.

If you ask me, Christian and his buddies were treated leniently by the court. Stock manipulation is a serious allegation. Lawyers who throw around that charge without adequate basis should not be allowed to practice law.

© 2009 Gary Weiss. All rights reserved.


Labels: junk lawsuits, naked short-selling, Wes Christian


posted by Gary Weiss @ 12:05 PM | links to this post

[janice shell]

Tell me again... HOW many "NSS" case has Wes Christian won?

[Stock]

His number makes a nice headline, but sounds a bit inflated to me.

thanks for the link.

[basserdan]

Andrew Cuomo: "Fails To Deiver is a $90 Trillion problem"


Andrew Cuomo says FTD is a 90 Trillion dollar problem

at the 38 min mark Wes Christian states:

Andrew Cuomo had told me he thought the scope of the program in the US is $90 TRILLION in fails to deliver of which naked shorting is part of that.

listen to the replay:

http://www.winningstrategies.net/business-talk-radio-show.php#show

then, if interested, click on "Recording Of The SECOND HOUR" and advance to the 1:45 point for the intro of Don Clark and Wes Christian....

[janice shell]

I have no problem admitting I'm wrong when I am. In this case, I'm not.

[janice shell]

And I could dig up detailed articles from the mainstream financial press that explain exactly what happened, but I can't be bothered, frankly.

Do you include "NSS" in every search you do?

[janice shell]

Volkswagen was simply shorted. It was not shorted naked.

But do continue to drink the KoolAid.

[janice shell]

Please do not quote from conspiracy websites here.

[eliaman]

Germany ban on naked short selling and Goldman Sachs ties
SiriusNews on Jun 7, 2010 06:34 PM
To News Media worldwide, I want to write this letter to clearly put together the story about what took place on Wall Street since the elimination of the uptick rule on July 6th, 2007 up until the current crisis in the United States as of today June 2010, just weeks away from financial reform to be signed into Law here in the United States. May 2007 Goldman Sachs hired math wiz computer programmer Segei Aleynikov July 2007 Up Tick rule abolished and Naked Short Selling Scandal begins as Housing scandal ends July 2007 Massive downgrades in credit ratings as the Housing scandal slows and Goldman Sachs moves into Stock Scandal FY 2008 U.S in a full blown recession due to financial crisis and naked short selling and other scandals tied to Goldman Sachs and others June 2008 Secret meeting in Moscow between Goldman Sachs board members and Hank Paulson Sept 2008 Financial meltdown and Last days of Lehman Brothers. Hank calls Loydd 24 times within a few days July 3rd 2009 FBI arrest Segei Aleynikov as he had sent over 1,000 secret codes and files to German Web Site Feb 24th, 2010 Up tick rule voted back in but with some circuit breakers April 15th 2010 Goldman Sachs tied to Galleon trading investigation April 16th, 2010 Goldman Sachs Civil Fraud Charges brought by Government/SEC May 4th, 2010 Goldman Sachs guilty of Naked Short Selling and pays fine May 6th, 2010 Stock market crash down 700 ponts is minutes to almost down 1,000 points on day. still looking for answers in an ongoing investigation. May 18th, 2010 Germany bans naked short selling. What does the German secret service know about the Goldman Sachs secret files sent to German web site? Now today, Newsweek comes out with a story June 7th, 2010 on page 42, where they state the arrest ofthe Goldman Sachs computer programmer. Newsweek June 7th, 2010 page 42. http://bit.ly/cbM89b Goldman Sachs secret codes/ arrest These facts are all connected, yet the News media has not put the story together. see these two video's on youtube that just came out, that clearly explains the connections and it all leads back to Goldman Sachs. part 1 Utube

see part 2 on YouTube

Upon watching these two youtube video listed above, you will begin to see the connection to Goldman Sachs. It has taken the action of Germany and other countries upon their investigationm to force the U.S news media to report parts of these facts, yet they still have nottold ENTIRE story and the connection. Go to these sites listed below to also get the true facts, that connect Goldman Sachs to the financial problems of the world. www.SiriusNews.com surf the site, blog, stock shock, twitter www.Twitter.com/StockShockmovie see the links to videos and stories about Goldman Sachs and Wall Street It is about time the News Media connect all the dots and tell the entire story and truth about Goldman Sachs. Germany has the 1000 secret codes and files from Goldman Sachs and how they have been stealing the money off investors worldwide. The FBI has the secret codes also. see the youtube video above, where it shows the FBI document that these files were sent to a German Web Site. Richard Keane www.SiriusNews.comblog

[Stock]

You might be interested in this news

DTCC Begins Aggregating Trade-for-Trade Obligations to Reduce Costs and Enhance Efficiencies for the Industry
Service Reduces the Number of Trade-for-Trade Transactions Requiring Financial Settlement

June 03, 2010 09:21 AM Eastern Daylight Time
NEW YORK--(EON: Enhanced Online News)--The Depository Trust & Clearing Corporation (DTCC) has begun aggregating each side of certain equities transactions that settle outside its systems into one receive and one deliver order to eliminate the need for financial firms to manually settle multiple transactions each day.

---

How the Service Works

As transactions flow from the exchanges and trading venues into NSCC’s trade capture system each day, buy and sell orders between counterparties in a given security that are designated by the clearing corporation to settle trade-for-trade are aggregated into a single receive and a single deliver order. However, as is currently the case with trade-for-trade transactions, the aggregated obligations are not netted against each other and are not guaranteed by NSCC.

Here’s an example of how the service works: if Broker A had fifteen buys against Broker B in Security X, these items would be aggregated into one receive obligation for A and one deliver obligation for B for the total amount of shares for the 15 transactions in Security X. If Broker A also had 20 sells with Broker B on that same day for the same security, those items would also be aggregated into one deliver obligation for A and one receive obligation for B. In this example, A and B would each have two settlement obligations with the other for Security X rather than the 35 obligations they would each have without aggregation.

“Trade-for-trade aggregation further extends DTCC’s ability to leverage its core capabilities to develop solutions that automate securities processing and help reduce costs for financial firms while protecting the safety and soundness of the financial markets,” said Cosgrove.

http://eon.businesswire.com/portal/site/eon/permalink/?ndmViewId=news_view&newsId=20100603006033&newsLang=en

[Stock]

I'll re-take the mod chair here, and remind folks once again, this board is about listed stocks, and authoritative commentary and rulemaking on short selling.

PLEASE READ THE iBOX IF YOU HAVE ANY QUESTIONS.

There are plenty of other places on iHub for non-listed stocks, and sub-penny stock naked short selling fiction and conspiracy theories. Take it elsewhere.

[Stock]

nobody in Government gives a shit about non-listed stocks.

and they surely don't want to hear from conspiracy wackos over the phone and email.

it's 99% about selling worthless paper once you get below the Nasdaq. accept the risk, or don't play.

[patchman]

4kids, just to be clear, SHORT SALE VOLUME does not represent just SHORT SALES. So the fact that the volume rose does not mean the short positions rose, it just means that the methods of trade changed.


On the SEC website they post this data. It is called Fails to Deliver Data. http://sec.gov/foia/docs/failsdata.htm

Now, if the shorts you claim are being made on a daily basis are legal you hve no gripe. If they were not legal (naked short) at least SOME of those massive levels of short sale trades would show up in the FTD data correct? Can you show us where they showed up?

On March 23rd, the day it hit a ten year low of $6.55, the stock traded over five million shares. Short volume rose by 891% to eleven million shares. Nixon said, “We’ve spent thirty years building this company, only to have it destroyed in 45 days.”

Tell me, how does short volume exceed trade volume? Isn't 11 Million greater than 5 million? And if he was talking about short interest, Nixon has no way of knowing when the shorts were accumulated since they are only reported on a bi-weekly basis. Nixon can never correlate a short interest report increase to a specific trade day.

But then those are simply the facts and we understand how facts sometimes get in the way here.

[fourkids_9pets]

On March 23rd, the day it hit a ten year low of $6.55, the stock traded over five million shares. Short volume rose by 891% to eleven million shares. Nixon said, “We’ve spent thirty years building this company, only to have it destroyed in 45 days.”

you know the drill .. anyone who *highlights* aspects
of the totally un level playing field .. is wearing tin
foil hats and is a conspiracy theorist .. riiiiiiight

but the sad reality is there is no co. that can't be
*destroyed*

Nixon detailed the lengthy process that companies are required to go through to issue new shares, saying “I don’t understand why the long side of the market has such stringent regulations while the short side of the market is the wild, wild west.” Gesturing to the industry insiders on the panel, he added, “Why does this go on? Because these guys make a lot of money doing this.”

what i find most disturbing is the *conditioning* that $$$$
is only made one way ~ it's beyond bizarre

--
4kids
all jmo

[breezin_chs]

Apparently it's more fun to be an outlaw than a sheriff or a mere citizen.

Lets premise by admitting that a true con man/manipulator will take what they are given and find a way to work it.

Agree and a good starting point.

Thanks for your facts, thoughts, opinions, WAG's. Every issue deserves a chapter. First some clarification.

Short selling still allows the abuses of multiple stock locates in the execution of trades which for day traders could allow multiples of the legitimate levels of short sales to be executed intra-day into a market. You can use this loophole as leverage to take 2,3,5, etc...% out of a stock intraday and profit at anothers loss.

Are you saying that the same share of stock ABCD, say, 1 share or a block of 10 million, can be obtained (or promised) from multiple sources without the sources knowing that the block is going to one trader, Mr. X Trader? Therefore, with different brokerage accounts, Mr. X can short the same block multiple times?

Or are you saying that, say, Mr. Ex-Management has a paper cert for 10M shares. Mr. Ex is willing to lend his shares to Mr. X Trader. Mr. X, through different brokers, uses the same cert to short the stock multiple times?

I have a feeling that you meant something else entirely.

The answer: mandatory pre-borrow.

Agree. Period. It's the shuffle that seems possible, which is why every share of stock should have a bulletproof ID number, IMO.

[TEX]

good post: kept

[patchman]

I wish you could devote some time to the loopholes, which are darned near invisible.

good point. There remains issues but not where 4kids is looking.

Lets premise by admitting that a true con man/manipulator will take what they are given and find a way to work it.

Regulations and transparency today clearly make it much more difficult to abuse a stock using persistent fails. so how do you abuse with less persistence?

1. Short selling still allows the abuses of multiple stock locates in the execution of trades which for day traders could allow multiples of the legitimate levels of short sales to be executed intra-day into a market. You can use this loophole as leverage to take 2,3,5, etc...% out of a stock intraday and profit at anothers loss. The flash type trading used by hedge funds could very easily be used this way and when Goldman's software was stolen they admitted that the software could be used to manipulate. The answer: mandatory pre-borrow. every short sale should be done with ownership to sell.

I think if you look at the most recent SEC actions against SHO violators you will find that it was a breakdown in the locate/borrow system that allowed the abuse to exist.

2. Because people are not educated enough to understand the short sale volume reports, they can be used to manipulate or used to deceive (buyins.net). better reporting should be presented that identifies specifically what the originating party was (short or long). that way those that choose to abuse thru pump and dump won't be able to use this presently bogus data as their example and, if massive intraday short sale abuses did take place, it would be easier to find. Answer: add more information into that report which separates out long and short from short sale volume. now this move may upset 4kids as it would screw up all efforts to blame NITE for insider fraud but this is the solution, not what she suggests.

3. Trade reporting. disclosure of shorts should be reported like disclosure of longs. If there is an issue of disclosure of proprietary trading strategy, disclosure should be based on majority type position. if you are more than 50% long you report long positions or if 50% or more short you post your short positions. To prevent the silent takeover, the 10% long rule applies even if you are more than 50% short. There is no reason that a firm like Kyinkos does not report at all because they are vastly short. Transparency cures much.

4. bona-Fide Market Making. tighter controls and better transparency is needed on how and when bona-fide market making is taking place. right now lack of transparency and with the market making and with the visibility they see that the public does not about what is out there for trade, market makers can pile on to a momentum (in either direction) to profit off stock manipulation. answer: A bona fide market making trade should be marked to the market when entered.

5. ex-Clearing. today there are no reports and no audits of this vehicle. This needs to change so it can be erased as an option and erased as an excuse.

Short selling can still be abusive to targeted companies but the issue is radically different than it was a decade ago and anybody that states otherwise has their head buried in the sand.

[breezin_chs]

patchman, interesting discussion.

I agree that the SEC has finally woken up, although it took a near meltdown of the economy to force them to acknowledge the problems.

Today we have transparency on fails in settlement.

Today we have more reporting cycles for short interest data.

Today we have regulators who are taking enforcement action against those that continue to violate Reg SHO rules.

All true, but all relative. I wish you could devote some time to the loopholes, which are darned near invisible. Yes, we need Ed 101.

When the SEC recently approved new short selling restrictions (tepid, IMO), for ex., it stamped Does Not Apply to unlisted stocks; OTCBB and the Pinks. In your opinion, why? To be clear, as I read it, the over-the-counter market below refers to the OTC derivatives market, which nobody has a handle on, a frighteningly unregulated $45 trillion market.

http://www.sec.gov/news/press/2010/2010-26.htm
SEC Approves Short Selling Restrictions

The alternative uptick rule generally would apply to equity securities that are listed on a national securities exchange, whether traded on an exchange or in the over-the-counter market.

Per the new restrictions above, my opinion is that the SEC and FINRA simply don't have the tools to read the Pinks with any accuracy, which is why the SEC is finally getting out a consolidated microscope.

http://sec.gov/news/press/2010/2010-86.htm
SEC Proposes Consolidated Audit Trail System to Better Track Market Trades

May 26, 2010 — The Securities and Exchange Commission today proposed a new rule that would require the self-regulatory organizations (SROs) to establish a consolidated audit trail system that would enable regulators to track information related to trading orders received and executed across the securities markets.

In your opinion, are the loopholes below valid? Invalid?

the other nooks and crannies of the system - broker-level netting, pre-netting, Stock Borrow Program, ex-clearing and off-shore failures.

Has any financial gizmo replaced Reg S?

Until the Reg S loophole closed, companies were able to issue unlimited quantities of free trading shares to "foreign entities" who were exempt from registration. This allowed small companies to engage in highly toxic financings and led to many abuses in illegal short selling.

We haven't even gotten to the stock-loan issue, which is unreal, IMO.

Finally, a revealing comment in testimony before the SEC by Dennis Nixon, CEO of IBC:

On March 23rd, the day it hit a ten year low of $6.55, the stock traded over five million shares. Short volume rose by 891% to eleven million shares. Nixon said, “We’ve spent thirty years building this company, only to have it destroyed in 45 days.”

Nixon detailed the lengthy process that companies are required to go through to issue new shares, saying “I don’t understand why the long side of the market has such stringent regulations while the short side of the market is the wild, wild west.” Gesturing to the industry insiders on the panel, he added, “Why does this go on? Because these guys make a lot of money doing this.”

[janice shell]

Thanks, Allen! They think they're a "team". They don't realize that trading stocks is not a team sport.

I very much doubt that they'll have any luck with the ETLS shell. Sheesh, no management. Not even a TA. Delinquent in SEC filings. Couldn't be much worse, really.

[Chimaera1950]

Janice, thanks for your posts on ETLS board.
I bought some small there, because it seemed to be moving.
But, it was more the board was trying to make something that wasn't there.
They were fooling themselves and they weren't allowing any other thoughts.
I wasn't arguing anything, because I wasn't qualified to do so.
I got out after the first night you posted and stuck my
little $ in something Monkish.
I appreciate your posts and look forward to more truth without bias.
I won't bother their board, because we all want to win and I won't take away anything the DO make out of ETLS.
Yet again, you earn a person mark.
Thanks again!
Allen

[janice shell]

Well *she* thinks *liquidty* is some kind of silly unnecessary notion that has no real relevance to the markets.

LOL!! You're right; she'd enjoy that kind of nostalgic time travel.

[patchman]

Do you even think she knows what liquidity is?

My bet is, if she can't find it in a POS stock PR by a crooked CEO she won't be able to find it.


4kids belongs back in 1934 when trading volume was low and settlement included couriers running paper between brokerage firms. maybe we could bring back the Model T and completely rid ourselves of computers.

[janice shell]

short volume posted by finra is exactly that
folks can contact finra directly and ask about
the data they provide daily ~

We have. And we actually understood what we were told.

[janice shell]

I would suggest that you take the first step by getting rid of your alias and come out with full disclosure of who you are.

I think that's an excellent idea. At the very least, she should do what she expects of others.

[janice shell]

So you want to limit a persons trade to once every 4 days.

fourkids is not
a *great believer* in
*liquidity* ~

[janice shell]

What is *fractured* is the intelligence of the microcap investor. Most are easily conned and most are naive in believing what company officers say without ever using logic to refute their statements. The SEC and Congress can't fix intelligence (or lack thereof). All they can do is provide transparency and hope that investors look at it objectively instead of burying their head in *wishful thinking* investments.

Hear hear!!

[fourkids_9pets]

patrick byrne's comments .. read on macduff

http://norris.blogs.nytimes.com/2009/04/30/is-naked-shorting-gone/?pagemode=print


--

APRIL 30, 2009, 10:39 PM
Is Naked Shorting Gone?

In my Friday column, I report on data that seems to indicate the S.E.C. has solved the naked shorting problem. That data indicates that the number of failed stock trades — in which shares are not delivered on time — is way down.

That column reports that Patrick Byrne, the chairman of Overstock.com, suggested a number of ways that failures could be hidden by Wall Street. But I did not offer detail on those views.

For anyone interested, here is the relevant e-mail exchange:

Mr. Byrne:
I notice that Overstock.com has not been on the Reg SHO list for some time, and that few stocks are on it now. Does that mean the rules have worked, or what other comments would you make?
Floyd Norris


Dear Mr. Norris,
Thank you for asking. As you may know, I have never primarily considered this fight to be about Overstock: it has been a fight to curtail illegal-but-winked at stock manipulation in our marketplace before more companies were destroyed and our marketplace destabilized. I always felt the insistence by some that my fight was about Overstock was part of a cover-up, and so I commend you for asking regarding the greater picture.

If I learned that the percentage of HIV-infection in the public blood supply had dropped, it would give me cheer, but I would not say, “This level of HIV infected blood has reached an acceptable level.” Similarly, seeing this drop in the number of firms on the Reg SHO list and the number of failed shares brings me cheer, but does not make me think the game is won. In particular, until we have data on failures in the other nooks and crannies of the system (broker-level netting, pre-netting, Stock Borrow Program, ex-clearing and off-shore failures) I cannot celebrate victory. However, yes I do think that the rule changes put in place during the latter part of last year made stock manipulation harder, and people have to be more sophisticated to do it.

Ultimately, what has to happen is that we go to requirements for pre-borrow and hard-delivery. That is what it will take to really end things. Incidentally, that is where the discourse was some months ago when it log-jammed within the SEC: on one side, the good guys arguing for pre-borrow and hard-delivery; on the other side, SIFMA and the Managed Funds Association arguing against them (on the grounds that if they were forced to stop doing that thing they have all along sworn they were not doing, it would dramatically affect liquidity). I believe (and have a source from within the SEC who tells me) that the current debate over the uptick rule was largely manufactured to shift the discourse. It is a red herring.
Respectfully,
Patrick Byrne

Thank you for your prompt reply.
Is there evidence available on the scale of the “failures in the other nooks and crannies of the system (broker-level netting, pre-netting, Stock Borrow Program, ex-clearing and off-shore failures)” that you refer to? Netting sounds as if it removes the possibility of manipulation. Is there a reason to think otherwise?
Floyd Norris

Dear Floyd,
First, just to make sure you know what I am talking about, I am sending you this section from an essay I wrote last August 3rd:

Let us look at where these unsettled trades can reside within the piping of the “factory” that is our nation’s stock settlement system, The Depository Trust & Clearing Company (“DTCC”). I will use Goldman and Morgan as hypothetical examples only.

“Desked trades” – Imagine Goldman takes your order for 1,000 shares of stock, but stashes your order in a desk and sends you statements saying that you have those 1,000 shares in your account (and use your money towards the $10 billion they pay themselves at the end of the year for being so clever). They have written a CDF to you without your knowledge: there is a 1,000 share failure-to-deliver to you at Goldman (which no one else knows about, incidentally).

“Pre-netting” – Goldman has one client sell 5,000 shares and another buys 3,000. The seller never delivers. Goldman “pre-nets” the trades before submitting them to the DTCC. Hence, the DTCC sees only 2,000 shares of the failure.

“CNS netting” – Goldman submits to the DTCC’s Continuous Net Settlement system that it sold 2,000 shares that it does not deliver. Imagine Morgan Stanley was on the other side of that particular trade. But maybe Morgan has a client who sold 1,000 to a Goldman client, and which that Morgan client failed-to-deliver. The DTCC nets the two trades, and therefore sees just 1,000 shares of failure (Goldman to Morgan).

“Stock Borrow Program” (“SBP”) – The DTCC looks at that 1,000 share failure, and says, “We have 400 shares we can loan Goldman from our Stock Borrow Program”, i.e., from the accounts of other BD’s within the DTCC. That reduces the failures it sees to 600.

“Ex-clearing” – Suppose Goldman and Morgan apply to the DTCC to move 500 of those fails ex-clearing, and the DTCC approves. Those 500 FTD’s are turned into a derivative contract between Goldman and Morgan. As a private contract, it is not regulated by the SEC, and the DTCC does not even know when that contract gets cleaned up, if ever.

“Offshore Failures” – Suppose someone sells 1,000 shares into this market from a foreign offshore exchange? There is a different terminology to describe such failures, and therefore the data is hard to get to. What is clear, however, is that there is little pressure to clean up failures among exchanges.

In this example, there are 100 failures at the CNS level. Yet there were 7,000 failures throughout the system. Therefore, we should remember that, however many unsettled equity trades there are at the CNS level, it is likely to be a fraction, and maybe a quite tiny fraction, of the total unsettled trades in the system.

What is the ratio of total fails in the system to those trapped in the CNS system? No one seems to know (and in fact, while the individual pieces of data are known individually, I strongly suspect that no one party has the bird’s eye view of how many of these there are at all levels). The estimates I am told range from 3 to 15. For ease I will refer to this as, “The Iceberg Principle” and the ratio of total failures to CNS failures as “I”.

So how big a problem is this?

·The last reported size of the failures-to-deliver at the CNS level are $8.7 billion.

·By Iceberg Principle, total failures = I X $8.7 billion ˜ $30 to $120 billion.

·By Feynman Principle, total cost to cover = F X I X $8.7b = F X ($30 to $120 billion).

So respectfully, Wall Street, I believe you are Oak Ridge, Tennessee, blithely going about your jobs at the factory, taking for granted “the piping” that is our settlement system. I believe you have manufactured, and are sitting squarely on top of, a financial atomic bomb. That’s not good for you, of course, and if it goes critical, America is downwind.

Second: So now your questions are: Doesn’t netting remove the possibility of manipulation? And, What evidence is there regarding the size of failures in those crevices?

a) Netting does not remove the possibility of manipulation, but masks it instead. Assume Goldman has a client selling 1,000 shares of stock ABC, and Morgan has a client who buys those 1,000 shares, but the shares never deliver. However, Morgan has another client who sells 1,000 shares, and Goldman has one who buys those 1,000, but they also never deliver. In total, there have been 2,000 shares sold but not delivered. However, by pre-netting the brokers’ fails, those failures disappear. Collectively the two sellers have weighed down the market with 2,000 shares of phantom stock, but the netting makes 0 fails show at the DTCC.

b) What is the evidence supporting my claims regarding the size of the failures in those other crevices? I am 100% confident of my claims because I possess incontrovertible proof that, for one particular stock whose name for legal reasons I cannot disclose (but you may be able to guess), the failures maintained by just one broker in just the ex-clearing crevice have been, at times, greater than the sum total of the failures showing up in the CNS system: Thus to me, this is a settled question.

For one not in a position to review such evidence, however, you will have to do what I have done, which is, interview people in the settlement industry, find out where trade failures can persist, and for how long, and why. I think any fair-minded researcher will quickly be told of how much slop there is in these stock settlement niches, how easy it is to take things ex-clearing, how deep the offshore failures run, and so forth. Then the fair-minded researcher will try to get some data from the SEC, or DTCC, and will discover that he is stonewalled on even the most basic information, a fact which would, I think, raise the suspicions of that fair-minded researcher. Indeed, this is where some members of your esteemed profession have rubbed me raw, because instead of saying, “Why can’t the Establishment release the data, if there is really nothing there?” (as until a few years ago I would have expected any journalist to reason), instead almost all of them have said, “Well, I agree there is evidence of settlement failures, but the Establishment says there’s no problem, and they won’t release the data to show me one way or another, so I’ll just stop digging.” After all, remember that we are not debating the properties of some newly-discovered subatomic particles: this data is knowable, and is in fact, known. Good luck trying to get anyone to release it to you (without filing the kind of massive, one-in-a-lifetime lawsuit against an entire industry, as I have done).

I hope this helps.

Patrick

[patchman]

4kids, I thought you were an educator. you post the data, why not explain what it means?

Have you come to terms yet with the FACT that short sale volume DOES NOT represent short sales executed by short sellers? Do you know that a large majority of the short sale volume reported are sales executed on behalf of LONG invstors but trades simply routed through a market maker or specialist condcting a riskless transaction? You see, if they are reported to the market (not hidden) they would likewise be reported in short interest every 2-weeks and yet - poof, they are not.

I see you call up Patrick Byrne's quote. How old is it? Didn't teh deepcapture team try and correct you several times and you siimply dismissed their corrections? Now you call upon their words?

You are very long winded without taking much responsibility for anything. Why is that? You are making a big deal out of teh short voluem reports, yet you don't yet know what they stand for. Interesting!

[fourkids_9pets]

short volume posted by finra is exactly that
folks can contact finra directly and ask about
the data they provide daily ~

i strongly believe NSS is a factor
particularly on co.s on the OTC
where *few* pay attn and exploitation
is easy

as patrick byrne pointed out to
the ny times .. there are many ways
for NSS to be *hidden* .. regardless
it's my *opinion* and it's one that
is shared by others including the
german gov't .. i'm grateful i lasted
long enough on ihub to see *changes*

when i first arrived .. the experts said
NSS didn't exist ~ that penny stocks were
never shorted and then when the SEC had to
admit to NSS (under the ever incompetent
chris cox) folks were *then* told it was
to provide liquidity

--
personally

what i pay attn to is volume traded
and the percentages .. it's pretty easy to
see when volume blows out ~ the question
becomes is it legit dilution or something
else entirely .. i look forward to effective
regulations consistently applied and loopholes
being eradicated across all levels ~

--
4kids
all jmo

[patchman]

you only make it about you with your loony ideas and baseless rhetoric.

answer the question. Do you propose a rule that would only allow an individual to trade a stock every 4-days. Isn't that what you propose if you can't trade until after settlement. you realize that T+3 is in place to deal with international trade and the delays associated with international settlement.

Please don't duck the questions, defend your proposals using DATA and LOGIC and not some dreamt up garbage. Have the COURAGE to defend the proposals you spam so frequently. You ask the SEC to defend theirs position and rules- why not try it yourself. Defend your position if YOU have all the answers.

I would suggest that you take the first step by getting rid of your alias and come out with full disclosure of who you are. You see, I do that because I have no fear in defending my position and stand behind my work and my name. People con the message boards because they have no fear when hiding behind an alias.

[patchman]

as janice would *post* christ on a crutch
let's expand horizons

Yes, lets expand YOUR horizons. When it comes to pedigree, I would say that my credibility vastly exceeds yours. you have talked in circles and generalities without ever actually cutting into details. Hate to tell you 4kids but the devil is in the DETAILS which is why I have a letter of reference from the Connecticut Director of Securities, I have a visit with the SEC's OIG, I have a session with the FBI, and I have people at the SEC and FINRA who will discuss my concerns with more depth.

Care to discuss what you hold for credentials that would suggest it is my horizons that need expanding?

Oh yes, I was 100% dead right on SPNG within a hour of looking at it and almost 9 months later you still haven't figured it out. LMAO

[zomniac]

Do you still stick to your analysis of the short sale and NSS figures you been posting ?

[fourkids_9pets]

this isn't about *me*

this is about a broken system
that doesn't have loopholes a
truck can be driven thru ...

can't wait to see what next week's
*installment* has to show ~

--
4kids
all jmo

[patchman]

again ~ i look forward to consistency
i look forward to agencies not having
turf wars and data on publicly traded
co.s being *shared* including all shares
of every publicly traded co. being tagged
and tracked and *delivered* b4 they can
be *re used* ..

So you want to limit a persons trade to once every 4 days. Your requirement would prevent you from buying a stock today, watch it run 50% tomorrow and be able to sell it because you do not yet Possess it. By the time it is delivered, that 50% profit could have evaporated. Is that what you want? You are suggesting that day trading would be made illegal right. Now in your vast ability to grasp complex issues, what impact do you think this would have on thearkets?

i look forward to every poster who posts
on a SMB (please note the word stock) being
held accountable for what is posted including
having to disclose *compensation* regardless
of which side of the trade they are on

so when you pumped SPNG as a legit company and people bought it off of your statements you should be held accountable? *IMO* at the bottom of a page isn't enough protection. And who prey tell would be responsible for tracfking the accuracy of disclosures with millions of SMB posters out there? Do you also suggest that no guns ever be given to would be killers? LMAO

i look forward to having the answers known
re: the rumors of the PRIMARY MM on the OTC
taking a stake in SMB located overseas

Feel free to hire an investigator. This is a rumor spend YOUR money investigating it. The world does not sit idle waiting for YOUR requests to be acted upon. Sometimes you just have to spend the time and money on your own if it means that much to you.

You really are a tiring individual because you don't listen well and your research into matters such as these are not of high quality. You are free to spout off at will about teh SEC and other regulators but in reality, the quality of their work is a notch or two above that of your work. Have YOU researched how a trade is reported yet or will you continue to misrepresent short volume data and based on your continued attempts at leading people down the wrong path, would it be fair to say that you believe an action should be taken holding YOU accountable for those that bought into your wrong representations --- since you were proven to be wrong?

[fourkids_9pets]

as janice would *post* christ on a crutch
let's expand horizons

they suck because they like most others *imo*
in washington are corporately owned ~

the problem has become the *greed*
(for lack of a better word)
has overtaken to the point where the
street and *others* would eat their
young if it proved profitable enough

again ~ i look forward to consistency
i look forward to agencies not having
turf wars and data on publicly traded
co.s being *shared* including all shares
of every publicly traded co. being tagged
and tracked and *delivered* b4 they can
be *re used* .. i look forward to every
publicly traded co. having to file but
not with the consequences of sox which
has crippled legit micro caps which then
created loopholes that could be exploited

i look forward to every poster who posts
on a SMB (please note the word stock) being
held accountable for what is posted including
having to disclose *compensation* regardless
of which side of the trade they are on

i look forward to having the answers known
re: the rumors of the PRIMARY MM on the OTC
taking a stake in SMB located overseas

if true the possibilities are mind boggling

and i can only hope those that illegally manipulate
a stock's pps regardless of who and how it's done
are dealt with accordingly .. it's little wonder
*retail* has any faith in anything the SEC has done

as i've said for years .. they are either complicit
(yep that would mean they aid/abet and collude)
or they are just damn incompetent ~ not a lot of
room for *in between* here .. *imo*

i can only hope the experiment of may 6th had some
unintended consequences of its own ~ and the SEC
can't pull the SOS it always does .. the image i've
had for at least 3 years now is that of an ostrich

--
4kids
all jmo

[fourkids_9pets]

including exactly who benefits from HFT, how much money they make in this fashion, and whether or not long-term investors (and the broader economy) really gain from such arrangements.

as always

great post .. great info and please god
may there truly be some *independent* thinking
at that panel

thanks

--
4kids
all jmo

[basserdan]

Is The SEC Still Working For Wall Street?

By Simon Johnson
May 28, 2010 at 6:04 am

(The underlined words are links in the original copy linked at the bottom of this post)

The Securities and Exchange Commission (SEC) under Mary Shapiro is trying to escape a difficult legacy – over the past two decades, the once proud agency was effectively captured by the very Wall Street firms it was supposed to regulate.

The SEC’s case against Goldman Sachs may mark a return to a more effective role; certainly bringing a case against Goldman took some guts. But it is entirely possible that the Goldman matter is a one off that lacks broader implications. And in this context the SEC’s handling of concerns about “high frequency trading” (HFT) – following the May 6 “flash crash”, when the stock market essentially shut down or rebooted for 20 minutes – is most disconcerting. (See yesterday’s speech by Senator Ted Kaufman on this exact issue; short summary.)

Regulatory capture begins when the regulator starts to see the world only through the eyes of the regulated. Rather than taking on board views that are critical of existing arrangements, tame regulators talk only to proponents of the status quo (or people who want even more deregulation). This seems to be what is happening with regard to HFT.

HFT is a big deal – perhaps as much as 70 percent of all stock trades are now done by “black box” computer algorithms (i.e., no one really knows how these work), and there are major open questions whether this operates in a way that is fair for small investors. (Disclosure: in 2000-2001, I was on the SEC’s Advisory Committee on Market Information; I was concerned about closely related issues, although market structure has changed a great deal over the past 10 years.)

The technical, “fact-gathering” activities of bodies like the SEC are of critical importance in both building an overall consensus – do we have a problem, what should we do about it – and also in creating the basis for regulatory action (e.g., the SEC does not even collect the data needed to understand how HFT contributed to the May 6 disaster). And anyone who has ever put together a relatively complicated discussion of this nature can attest that how you frame the issues is typically decisive, i.e., what is presented as the range of reasonable alternative views?

On Wednesday, the SEC will hold a “market structure roundtable” to discuss “high frequency trading, undisplayed liquidity, and the appropriate metrics for evaluating market structure performance.” But who exactly will be at this discussion?

The names of panelists for this discussion are not yet public and probably not yet final – but the preliminary list is far too much slanted towards proponents of HFT (6 out of 7 seats at the table; see Senator Kaufman’s speech for details), with hardly any representation of people in the markets (e.g., “buy side” mutual funds) who think HFT is potentially out of control or unfair. It looks very much like someone is setting up a love fest for HFT – and a boxing match with 6 tough guys against one lonely critic.

To be fair, after coming under heavy pressure from a leading member of the Senate Banking Committee over the past 48 hours, the SEC is backpedaling quickly and indicating that the panel invitations can be broadened. This is encouraging – perhaps the agency is finally overcoming its tin ear problem.

But nothing other than a balanced panel on June 2 would be acceptable. At the very least, the SEC needs to increase the panel to 10 people – 5 for and 5 against. And all the issues need to be on the table – including exactly who benefits from HFT, how much money they make in this fashion, and whether or not long-term investors (and the broader economy) really gain from such arrangements.

The SEC must understand that it has a long way to go to restore its credibility. Wednesday’s quasi-hearing is an important test and many people will be watching carefully.

http://baselinescenario.com/2010/05/28/is-the-sec-still-working-for-wall-street

[patchman]

Pounding the table but saying nothing will not yield results.

Whether you want to ADMIT it or not, the SEC has made many strides relative to short selling and NSS. I have read your poundings and to be honest, you are living in the past with your views.

Today we have transparency on fails in settlement.

Today we have more reporting cycles for short interest data.

Today we have regulators who are taking enforcement action against those that continue to violate Reg SHO rules.

Is it a perfect world free of mistake or fraud - nope. But then again, name one person alive that has never made a mistake. to think that a one size fits all will work in a complex arena like the stock market is naive. In fact, the presentations for reform you have suggested would do more harm then good when applied at a full market level.

All that being said, lets take short sale volume - the metric most misunderstood. The data is used in appropriately by peope who want to fit a square peg in a round hole. They want to suggest that the data alone supports massive NSS when it fact it does nothing of the sort. people need to EDUCATE first on what is tabulated in that column before yelling at the rooftops what they think it means because they discredit all their opinions when their statements are devoid of fact.

What is *fractured* is the intelligence of the microcap investor. Most are easily conned and most are naive in believing what company officers say without ever using logic to refute their statements. The SEC and Congress can't fix intelligence (or lack thereof). All they can do is provide transparency and hope that investors look at it objectively instead of burying their head in *wishful thinking* investments.

The fight against NSS abuses has come a long way. There is far more scrutiny and far more transparency than ever before. To deny that is being disengenious and I have a very public opinion on this subject.

[fourkids_9pets]

exactly ..

some of us have been pounding the table
for a few years now .. i'm just glad that
more and more are becoming *aware*

as someone pointed out to me recently
knowledge is power .. i have little
respect for a *fragmented* market and
an incompetent SEC .. here's to change
that actually isn't a prerequisite to
exploiting additional loopholes

--
4kids
all jmo

[breezin_chs]

4kids, thanks for the info and link.

http://norris.blogs.nytimes.com/2009/04/30/is-naked-shorting-gone/?pagemode=print

Despite all the egg on his face, it's good to see that Floyd Norris is at least talking to Patrick Byrne.

It's amazing that an individual has to explain the (purposefully?) complicated stuff to Congress, the press and the rest of us: the other nooks and crannies of the system - broker-level netting, pre-netting, Stock Borrow Program, ex-clearing and off-shore failures.

The best hope for a level playing field occurred two days ago, IMO. If the SEC is blind, the rest of us don't stand a chance.

http://sec.gov/news/press/2010/2010-86.htm
SEC Proposes Consolidated Audit Trail System to Better Track Market Trades

May 26, 2010 — The Securities and Exchange Commission today proposed a new rule that would require the self-regulatory organizations (SROs) to establish a consolidated audit trail system that would enable regulators to track information related to trading orders received and executed across the securities markets.

[fourkids_9pets]

yep ~ and i'm grateful not every *system*
is as corrupt or incompetent as the us system
is ~ but what has been revealed in the past
48 hours by the SEC .. talk about christ on
a crutch .. seriously beyond the pale as to
the gross incompetence or outright *collusion*
with those *select* entities who can and do
exploit loopholes daily in their continued
profiting for destruction ~


http://investorshub.advfn.com/boards/read_msg.aspx?message_id=50621466

--
4kids
all jmo

[fourkids_9pets]

hmm the old *liquidity* argument
fascinating when the OS on some
OTC stocks no. into the BILLIONS

yep i can see where *liquidity* would be
a factor with billions of shares *available*
to *trade*

interesting commentary by patrick byrne to floyd norris
from april 2009 ~ from an individual who had the money
and the time to *ascertain* aspects *retail* never could

APRIL 30, 2009, 10:39 PM
Is Naked Shorting Gone?

In my Friday column, I report on data that seems to indicate the S.E.C. has solved the naked shorting problem. That data indicates that the number of failed stock trades — in which shares are not delivered on time — is way down.

That column reports that Patrick Byrne, the chairman of Overstock.com, suggested a number of ways that failures could be hidden by Wall Street. But I did not offer detail on those views.

For anyone interested, here is the relevant e-mail exchange:

Mr. Byrne:
I notice that Overstock.com has not been on the Reg SHO list for some time, and that few stocks are on it now. Does that mean the rules have worked, or what other comments would you make?
Floyd Norris


Dear Mr. Norris,
Thank you for asking. As you may know, I have never primarily considered this fight to be about Overstock: it has been a fight to curtail illegal-but-winked at stock manipulation in our marketplace before more companies were destroyed and our marketplace destabilized. I always felt the insistence by some that my fight was about Overstock was part of a cover-up, and so I commend you for asking regarding the greater picture.

If I learned that the percentage of HIV-infection in the public blood supply had dropped, it would give me cheer, but I would not say, “This level of HIV infected blood has reached an acceptable level.” Similarly, seeing this drop in the number of firms on the Reg SHO list and the number of failed shares brings me cheer, but does not make me think the game is won. In particular, until we have data on failures in the other nooks and crannies of the system (broker-level netting, pre-netting, Stock Borrow Program, ex-clearing and off-shore failures) I cannot celebrate victory. However, yes I do think that the rule changes put in place during the latter part of last year made stock manipulation harder, and people have to be more sophisticated to do it.

Ultimately, what has to happen is that we go to requirements for pre-borrow and hard-delivery. That is what it will take to really end things. Incidentally, that is where the discourse was some months ago when it log-jammed within the SEC: on one side, the good guys arguing for pre-borrow and hard-delivery; on the other side, SIFMA and the Managed Funds Association arguing against them (on the grounds that if they were forced to stop doing that thing they have all along sworn they were not doing, it would dramatically affect liquidity). I believe (and have a source from within the SEC who tells me) that the current debate over the uptick rule was largely manufactured to shift the discourse. It is a red herring.
Respectfully,
Patrick Byrne

Thank you for your prompt reply.
Is there evidence available on the scale of the “failures in the other nooks and crannies of the system (broker-level netting, pre-netting, Stock Borrow Program, ex-clearing and off-shore failures)” that you refer to? Netting sounds as if it removes the possibility of manipulation. Is there a reason to think otherwise?
Floyd Norris

Dear Floyd,
First, just to make sure you know what I am talking about, I am sending you this section from an essay I wrote last August 3rd:

Let us look at where these unsettled trades can reside within the piping of the “factory” that is our nation’s stock settlement system, The Depository Trust & Clearing Company (“DTCC”). I will use Goldman and Morgan as hypothetical examples only.

“Desked trades” – Imagine Goldman takes your order for 1,000 shares of stock, but stashes your order in a desk and sends you statements saying that you have those 1,000 shares in your account (and use your money towards the $10 billion they pay themselves at the end of the year for being so clever). They have written a CDF to you without your knowledge: there is a 1,000 share failure-to-deliver to you at Goldman (which no one else knows about, incidentally).

“Pre-netting” – Goldman has one client sell 5,000 shares and another buys 3,000. The seller never delivers. Goldman “pre-nets” the trades before submitting them to the DTCC. Hence, the DTCC sees only 2,000 shares of the failure.

“CNS netting” – Goldman submits to the DTCC’s Continuous Net Settlement system that it sold 2,000 shares that it does not deliver. Imagine Morgan Stanley was on the other side of that particular trade. But maybe Morgan has a client who sold 1,000 to a Goldman client, and which that Morgan client failed-to-deliver. The DTCC nets the two trades, and therefore sees just 1,000 shares of failure (Goldman to Morgan).

“Stock Borrow Program” (“SBP”) – The DTCC looks at that 1,000 share failure, and says, “We have 400 shares we can loan Goldman from our Stock Borrow Program”, i.e., from the accounts of other BD’s within the DTCC. That reduces the failures it sees to 600.

“Ex-clearing” – Suppose Goldman and Morgan apply to the DTCC to move 500 of those fails ex-clearing, and the DTCC approves. Those 500 FTD’s are turned into a derivative contract between Goldman and Morgan. As a private contract, it is not regulated by the SEC, and the DTCC does not even know when that contract gets cleaned up, if ever.

“Offshore Failures” – Suppose someone sells 1,000 shares into this market from a foreign offshore exchange? There is a different terminology to describe such failures, and therefore the data is hard to get to. What is clear, however, is that there is little pressure to clean up failures among exchanges.

In this example, there are 100 failures at the CNS level. Yet there were 7,000 failures throughout the system. Therefore, we should remember that, however many unsettled equity trades there are at the CNS level, it is likely to be a fraction, and maybe a quite tiny fraction, of the total unsettled trades in the system.

What is the ratio of total fails in the system to those trapped in the CNS system? No one seems to know (and in fact, while the individual pieces of data are known individually, I strongly suspect that no one party has the bird’s eye view of how many of these there are at all levels). The estimates I am told range from 3 to 15. For ease I will refer to this as, “The Iceberg Principle” and the ratio of total failures to CNS failures as “I”.

So how big a problem is this?

·The last reported size of the failures-to-deliver at the CNS level are $8.7 billion.

·By Iceberg Principle, total failures = I X $8.7 billion ˜ $30 to $120 billion.

·By Feynman Principle, total cost to cover = F X I X $8.7b = F X ($30 to $120 billion).

So respectfully, Wall Street, I believe you are Oak Ridge, Tennessee, blithely going about your jobs at the factory, taking for granted “the piping” that is our settlement system. I believe you have manufactured, and are sitting squarely on top of, a financial atomic bomb. That’s not good for you, of course, and if it goes critical, America is downwind.

Second: So now your questions are: Doesn’t netting remove the possibility of manipulation? And, What evidence is there regarding the size of failures in those crevices?

a) Netting does not remove the possibility of manipulation, but masks it instead. Assume Goldman has a client selling 1,000 shares of stock ABC, and Morgan has a client who buys those 1,000 shares, but the shares never deliver. However, Morgan has another client who sells 1,000 shares, and Goldman has one who buys those 1,000, but they also never deliver. In total, there have been 2,000 shares sold but not delivered. However, by pre-netting the brokers’ fails, those failures disappear. Collectively the two sellers have weighed down the market with 2,000 shares of phantom stock, but the netting makes 0 fails show at the DTCC.

b) What is the evidence supporting my claims regarding the size of the failures in those other crevices? I am 100% confident of my claims because I possess incontrovertible proof that, for one particular stock whose name for legal reasons I cannot disclose (but you may be able to guess), the failures maintained by justone broker injust the ex-clearing crevice have been, at times, greater than the sum total of the failures showing up in the CNS system: Thus to me, this is a settled question.

For one not in a position to review such evidence, however, you will have to do what I have done, which is, interview people in the settlement industry, find out where trade failures can persist, and for how long, and why. I think any fair-minded researcher will quickly be told of how much slop there is in these stock settlement niches, how easy it is to take things ex-clearing, how deep the offshore failures run, and so forth. Then the fair-minded researcher will try to get some data from the SEC, or DTCC, and will discover that he is stonewalled on even the most basic information, a fact which would, I think, raise the suspicions of that fair-minded researcher. Indeed, this is where some members of your esteemed profession have rubbed me raw, because instead of saying, “Why can’t the Establishment release the data, if there is really nothing there?” (as until a few years ago I would have expected any journalist to reason), instead almost all of them have said, “Well, I agree there is evidence of settlement failures, but the Establishment says there’s no problem, and they won’t release the data to show me one way or another, so I’ll just stop digging.” After all, remember that we are not debating the properties of some newly-discovered subatomic particles: this data is knowable, and is in fact, known. Good luck trying to get anyone to release it to you (without filing the kind of massive, one-in-a-lifetime lawsuit against an entire industry, as I have done).

I hope this helps.

Patrick

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=49584255

[breezin_chs]

I included that for other posters. You may want to search for a Mac equivalent.

[janice shell]

Well, a Windows scanner wouldn't be of any use to me.

[breezin_chs]

I've never had an "attack".

Yes, you have. You just didn't know it unless you have R/T monitoring set up to tell you.

Recently iHub has been getting hit with a particular trojan, the HTML/Infected.WebPage.Gen - Malware (Trojan), which may be used to perform malicious activities on your computer and possibly download additional malware.

BTW, since you're Mac, you're still vulnerable.

Probably you're just being pinged.

Nope. Good Windows online scanner:
http://windowsecurity.com/ > Security Tests > Trojan Scan > Select Deep Scan (and go walk the dog).

[basserdan]

Today Germany...... tomorrow, the world! <g>


Berlin poised to extend short selling ban

By Gerrit Wiesmann in Berlin
May 25 2010 14:55

The German government is planning to ban the naked short selling of all German stocks listed on the country’s exchanges in a sweeping enlargement of last week’s contentious bar on the naked short selling of some securities.

The move is part of a national crackdown on financial-market speculation, which Berlin thinks has gone unregulated for too long as European Union and G20 members search for agreement about new rules at an international level.

In a surprise move last Tuesday, Berlin decided partially to ban naked short selling – the practice of selling securities such as shares and bonds that are not owned or borrowed – of eurozone sovereign bonds and credit default swaps. as well as the shares of a group of 10 leading German financial stocks. That caused consternation in other European capitals, largely because of its unexpected, unilateral nature.

National securities regulators in Europe are in intense discussions over how to respond to the German ban, with a possible announcement on greater co-operation as early as this week.

Berlin’s announcement also enraged international partners, who had not been briefed about Germany’s decision to go it alone. It was not immediately clear how involved other capitals have been informed of the latest move.

People briefed on the matter said the government was now following through on a promise to turn last week’s ban into more permanent legislation. The cabinet could sign off on a bill next month.

These people said that a draft bill now being circulated in the German capital would ban market participants from selling certain securities without owning them, or having an option to buy them, at the time of the “naked” sale.

The proposals would also be extended to some euro currency-derivatives, these people said. Berlin would also seek to make more transparent who was selling securities short and in what volume.

http://www.ft.com/cms/s/0/84bbacde-67ff-11df-af6c-00144feab49a.html?ftcamp=rss

[janice shell]

Because I've read tons of posts about it.

[eliaman]

if this has never happend to you how would you know this to be the case? "Probably you're just being pinged. Happens automatically, for a variety of reasons, and has nothing to do with IHub."