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Found: flawless diamonds abandoned by De Beers
http://www.timesonline.co.uk/article/0,,3-1460769,00.html
Its got only 2.5 cpht LOL, BUT .....
Who cares if FALC is termed a "low grade deposit". It's gonna be the size of the stones that set the price.
JOHANNESBURG --The discovery of four huge, flawless diamonds has left the owners of the world’s highest diamond mine feeling on top of the world. The four stones with a combined weight of 366 carats were found in the course of six days between January 21 through January 27 at Letšeng diamond mine, in the Maluti Mountains of Lesotho. The stones, which the company says are of the highest quality, are expected to fetch around US$6 million.
“There is a world-wide shortage of large high-quality stones so $6-million might even be a little conservative,” Keith Whitelock, the mine’s chief executive, said.
Letšeng, which was mined by De Beers between 1977 and 1982, was reopened last year by a South African consortium made up of Motodzi Investments, a black empowered investment house, and JCI, a South African resource investment company, which together own 68.4 percent of the mine. It has already declared four large diamonds of 95, 123, 124 and 215 carats respectively since the end of 2003.
Despite having the lowest grade in the world, less than 2.5 carats per hundred tons, the mine remains profitable because of the high incidence of large ten-carat plus stones, and high per-carat prices.
JCI director Brett Kebble said today, “We invested in Letseng because the mine has a solid history of producing high-quality stones which fetch a premium on the world market. The regularity with which they are appearing is better than we predicted and we may have to revise our production forecasts if the trend continues.”
Who cares if FALC is termed a low grade area. It's gonna be the size of the stones that srt the price.
JOHANNESBURG --The discovery of four huge, flawless diamonds has left the owners of the world’s highest diamond mine feeling on top of the world. The four stones with a combined weight of 366 carats were found in the course of six days between January 21 through January 27 at Letšeng diamond mine, in the Maluti Mountains of Lesotho. The stones, which the company says are of the highest quality, are expected to fetch around US$6 million.
“There is a world-wide shortage of large high-quality stones so $6-million might even be a little conservative,” Keith Whitelock, the mine’s chief executive, said.
Letšeng, which was mined by De Beers between 1977 and 1982, was reopened last year by a South African consortium made up of Motodzi Investments, a black empowered investment house, and JCI, a South African resource investment company, which together own 68.4 percent of the mine. It has already declared four large diamonds of 95, 123, 124 and 215 carats respectively since the end of 2003.
Despite having the lowest grade in the world, less than 2.5 carats per hundred tons, the mine remains profitable because of the high incidence of large ten-carat plus stones, and high per-carat prices.
JCI director Brett Kebble said today, “We invested in Letseng because the mine has a solid history of producing high-quality stones which fetch a premium on the world market. The regularity with which they are appearing is better than we predicted and we may have to revise our production forecasts if the trend continues.”
Klonopin2mg2000 - More on Shore Gold for you..
Ashton boosts its diamond hopes
2005-01-28 13:56 ET - Street Wire
by Will Purcell
Ashton Mining of Canada Inc. has a big new diamond haul. The company completed a mini-bulk test of its promising Renard-3 pipe and the numbers did not disappoint. The small kimberlitic pipe delivered promising grades and stone sizes in smaller tests and the latest batch of rock confirms that result. Ashton now seems certain to surpass its 300-carat target by a good margin, adding to the parcel of stones available for valuation. The largest Renard-3 gems seem likely to boost the average value of the Renard diamonds, but there will still be many questions that the company will have to answer over the next year. Ashton and its partner, Soquem Inc., have much more to do in the coming years to actually prove their Otish project.
The results
Ashton's Renard-3 sample weighed 146 tonnes and the rock delivered 184 carats of diamonds larger than a 1.18-millimetre sieve. That worked out to a grade of 1.26 carats per tonne. That is significantly better than that which a much smaller batch of rock delivered late last year, but less than that which two small samples produced before that.
Just before Christmas, Ashton recovered 5.89 carats from 8.6 tonnes of Renard-3 kimberlite, suggesting a grade of about 0.68 carat per tonne. That was mildly disappointing. Earlier, two five-tonne batches of rock handily topped the one-carat-per-tonne mark.
Late in 2002, Ashton came up with 6.54 carats using a 0.85-millimetre cut-off, good for a grade of 1.34 carats per tonne. Things were even rosier last spring, when Ashton recovered 7.81 carats using the larger cut-off. That pointed to a grade of 1.53 carats per tonne.
In all, Ashton and Soquem recovered 204.24 carats of diamonds from 164.6 tonnes of Renard-3 kimberlite. That indicates an average grade of about 1.24 carats per tonne, making Renard-3 the best of the Otish kimberlites so far. The partners still have a mini-bulk test from Renard-2 to hear from, but the body has just a slim shot of topping the tally from its smaller sister.
Renard-3 has the best grades, and it clearly has the best size distribution so far. The latest test produced a 4.30-carat diamond that likely exceeded the weight of a four-carat stone that Ashton found in rock taken from Renard-65 in 2003.
That latter find seems a bit of a fluke, unlike the Renard-3 gem. Ashton recovered two more diamonds from Renard-3 that weighed in excess of two carats and seven other stones weighed more than one carat. That should not have been a big surprise. Ashton recovered two diamonds that weighed more than one carat during its earlier tests, and one of the stones weighed 1.82 carat.
So far, Ashton has at least three diamonds larger than two carats from Renard-3. Those stones weigh 9.29 carats and account for about 4.5 per cent of the total weight of the Renard-3 parcel. Ashton did not say how much the nine additional one-carat gems weighed, but something around 12 carats seems a reasonable expectation.
Based on that, Ashton would have a total of 12 diamonds larger than one carat, weighing a bit more than 21 carats. That suggests that one-carat diamonds account for about 10 per cent of the Renard-3 parcel. That is a more substantial fraction than that which the other Renard bodies delivered, although it falls short of some other potentially economic pipes in Canada.
The comparison
The Renard-3 size distribution is clearly superior to what Ashton produced from 123 tonnes of kimberlite from Renard-4. That material contained 55.6 carats, and only one of the diamonds was larger than one carat. That stone did weigh an impressive 2.9 carats, but none of the other diamonds weighed over 0.7 carat, making the find seem a stroke of luck.
Based on that one stone, about 5 per cent of the diamond parcel at Renard-4 came from diamonds weighing over one carat. Still, barring some pleasant surprises in the remaining 50 tonnes of material yet to come, the value appears optimistic.
It was a similar story at Renard-65, where Ashton recovered 40.8 carats of diamonds from 159 tonnes of kimberlitic rock. The largest stone weighed about four carats and it accounts for about 10 per cent of the parcel weight, but that is clearly skewed by the one fortunate find. None of the other diamonds at Renard-65 weighed over one carat, although five stones did manage to top the 0.7-carat mark.
Far less certain is the situation at Renard-2, where Ashton recovered 22 carats from 25 tonnes of rock. Only one diamond weighed in excess of one carat, and that 1.18-carat stone accounted for about 5 per cent of the parcel. That find was no fluke however, as Ashton also recovered two stones weighing 0.94 carat and 0.91 carat. It will take the tallies from the remaining 150 tonnes of kimberlite to provide a clearer picture of the size distribution at Renard-2. Still, the earlier results do offer hints of hope.
Ashton now has nearly 323 carats from the 472 tonnes of kimberlite extracted from the four main Renard pipes. The 15 one-carat diamonds account for nearly 30 carats of the diamond weight, or roughly 9 per cent of the entire parcel. The five two-carat diamonds weighed 16.2 carats, accounting for 5 per cent of the diamond weight. There is a good chance that those proportions are mildly skewed by the few fortunate finds, as well as an unrepresentatively larger sample from Renard-3, which is by far the smallest of the Otish pipes.
The Renard results fall short of some other key projects in Canada. For instance, Shore Gold Inc. is nearly finished with its 25,000-tonne test of its Star pipe in Saskatchewan. The diamond tally recently topped the 3,000-carat mark, with most of the stones coming from a higher-grade phase of rock. About 20 per cent of the diamond weight comes from stones weighing in excess of two carats, with one-carat gems accounting for about one-third of the Star diamonds.
The Star parcel is still awaiting an assessment, but Shore is hoping the diamond value will top $125 (U.S.) per carat. That seems a reasonable hope, as size is a powerful influence on diamond value. As well, the proportion of white diamonds is high at Star.
Tahera Diamond Corp. also has a particularly promotable size distribution at its Jericho pipe, where the company processed a 9,000-tonne test in the latter half of the 1990s. The sample yielded some large stones, including a 40-carat diamond. A few others topped the 20-carat mark.
Like Star, one-carat diamonds at Jericho account for about one-third of the weight of the diamond parcel. Five-carat stones produced about 7 per cent of the carat crop. Tahera now thinks its diamonds are worth something approaching $100 (U.S.) per carat.
The Snap Lake dike is also a prolific producer of larger diamonds. A 6,000-tonne test produced over 10,000 carats, and about 20 per cent of the weight came from one-carat diamonds. Five-carat stones accounting for roughly 4 per cent of the tally. Winspear's diamonds produced an appraisal of $118 (U.S.) per carat, although De Beers Canada Corp., which now owns the project, has a value of about $75 (U.S.) per carat at last report.
Those comparisons would seem to augur poorly for the Renard bodies, but things are rarely that simple. Some deposits have healthy diamond valuations without a particularly coarse stone size distribution. For instance, De Beers pegs the diamond value of its Gahcho Kue at nearly $80 (U.S.) per carat at its AK-5034 pipe and about $65 (U.S.) at Hearne.
The company mini-bulk tested the two bodies several times since the late 1990s, and the carat tallies include modest quantities of larger diamonds. One-carat diamonds account for about 10 per cent of the diamonds from the western lobe of AK-5034, while similar stones at Hearne and the eastern lobe of AK-5034 produced just 7 per cent of the diamond weight. Two-carat diamonds at AK-5034 may account for up to 5 per cent of the full diamond parcel. Those recoveries seem roughly comparable with what Ashton is coming up with in its Renard pipes.
The implications
The improving grade and size distribution of the cumulative mini-bulk test are boosting expectations for the value of the Renard rock. Although size is an important consideration, it is only one of several influences on the value of a diamond.
Ashton has had little to say about the general quality of its stones, but the company has been a bit chatty about the characteristics of its largest stones. Those descriptions have triggered some concern that the Renard diamonds will not produce a promotable appraisal, but the latest Renard-3 results should help lessen those worries.
The 4.3-carat stone was a clear and colourless octahedron, as was the 2.29-carat stone that ranks third. The 2.7-carat diamond was also clear and colourless and it had a tetrahexahedral shape. Prior to that, many of Ashton's larger diamonds were brown or grey in colour, and a significant portion were composite stones. Some of the other large diamonds also have a favourable description. The four-carat stone from Renard-65 appears to be a potentially valuable diamond, and the 2.9-carat stone from Renard-4 was a clear and colourless octahedron.
If Ashton ends up with a 400-carat parcel, the diamonds would require an appraisal of about $40,000 (U.S.) to achieve the average of $100 (U.S.) per carat that many speculators are hoping for. That might seem a tall order, based on many of the diamond descriptions and the relatively modest size distribution, but it typically takes a small collection of valuable gems to account for most of the value. As a result, it is too soon to jump to conclusions.
Investors were in a buying mood, as Ashton gained 15 cents on Thursday, closing at $1.05.
De Beers could sink C$2.5 bln into Canada by 2009
Fri January 28, 2005 8:28 AM GMT+02:00
By Nicole Mordant
VANCOUVER, British Columbia (Reuters) - De Beers could spend nearly C$2.5 billion in Canada over the next five years, exploring for diamonds and building mines if the search is successful, a De Beers executive said on Thursday.
The world's biggest diamond producer and a name synonymous with the sparkling gems, has already spent more than C$1 billion in Canada over the past 40 years searching for stones and now developing its first mine.
"But the (C$1 billion) investment pales in comparison to our planned expenditures over the next five years if all goes well," said John McConnell, vice president of projects in Canada's Northwest Territories.
McConnell's presentation to delegates at an exploration conference in Vancouver showed that De Beers could spend C$2.3 billion between 2005 and 2009 on four projects in Canada -- Snap Lake, Victor, Gahcho Kue and Fort a la Corne. Included in the total is some C$150 million for exploration.
The figures give some insight into the thinking of De Beers, a private company that is generally close-mouthed about its business, and which is owned 45 percent by Anglo American Plc.
Of the projects, most funds are earmarked for the Victor deposit in Northern Ontario, C$957 million, and the Snap Lake project in the Northwest Territories, C$774 million, where mine construction is due to start in April.
McConnell said that the permitting of Snap Lake, which took about three years, had cost between C$90 million and C$110 million. Snap Lake should be Canada's fourth diamond mine if it starts up on schedule in mid 2008.
Equipment will start being moved in a few weeks time along a winter road to Snap Lake, a diamond-bearing dyke underneath a lake some 220 kilometres (138 miles) northeast of Yellowknife, the capital of the Northwest Territories, and just south of the treeline.
McConnell said the project, bought by De Beers in 2000 for C$478 million, has faced a number of challenges, including keeping lake water out of the mine, and higher fuel, cement, steel and wage costs. He also said it has been difficult finding enough skilled workers in the remote Northwest Territories, where Canada's two operating diamond mines are located.
A third, much smaller, mine, Tahera Corp.'s Jericho project in Canada's Nunavut territory, is expected to start up in 2006.
What have you made on naked shorts Janice?
I woulda made about $30 million
Forest Gate Hires Former EKATI Diamond Mine Geologist As VP Exploration
Thursday January 27, 3:26 pm ET
Du Plessis Retained as Consultant
SHARES OUTSTANDING: 26 MILLION SYMBOL & EXCHANGE: FGT-V
MONTREAL, Jan. 27 /CNW/ - Forest Gate Resources Inc. reports that it has hired Steve Roebuck as Vice-President, Exploration, replacing the outgoing Pieter Du Plessis, who has set up a diamond exploration consultancy.
Roebuck was most recently production supervisor with BHP Billiton's EKATI Diamond Mine in the Northwest Territories. He was responsible for the short- term mine plan at Canada's first diamond mine.
Roebuck began working at EKATI in 2000 as a geologist responsible for geotechnical and lithological definition diamond drilling. As production geologist he was responsible for supplying EKATI's 15,000 tonne-per-day processing plant with blended, high quality ore feed from three of EKATI's open pit mines.
At EKATI, Roebuck was also part of a team of geologists who discovered high-grade kimberlite lenses in ore bodies previously thought to be waste rock.
Prior to joining BHP Billiton, Roebuck worked for six years with Royal Oak Mines and other companies as an exploration and mine geologist. Roebuck will be based at Forest Gate's head office in Montreal and will begin working for the company on February 17.
Du Plessis' consulting firm, Du Plessis Diamonds Inc., has also been retained by Forest Gate to provide ongoing diamond exploration consulting. Du Plessis' consultancy is based in Saskatoon, Saskatchewan, several hours south of the company's East Side diamond property located near Prince Albert.
"Forest Gate continues to recruit the best and brightest in diamond exploration," says Michael Judson, Forest Gate's President. "I am pleased to attract Canadian diamond expertise to our company. We are building a very powerful diamond exploration team."
The company has granted Steve Roebuck 300,000 share options exercisable at any time over the next five years at $0.15 per share. Forest Gate has also granted consultant, Pieter Du Plessis, 100,000 share options under the same price and terms as the above.
Forest Gate is a publicly traded mineral exploration company with diamond properties in Saskatchewan and precious and base metal properties in New Brunswick. The company's shares and warrants trade under the symbol FGT on the TSX Venture Exchange.
Forward-Looking Statements
This news release contains discussion of items that may constitute forward-looking statements within the meaning of securities laws that involve risks and uncertainties. Although the company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurances that its expectations will be achieved. Factors that could cause actual results to differ materially from expectations include the effects of general economic conditions, actions by government authorities, uncertainties associated with contract negotiations, additional financing requirements, market acceptance of the Company's products and competitive pressures. These factors and others are more fully discussed in Company filings with Canadian securities regulatory authorities.
The TSX Venture Exchange has not reviewed nor does it accept responsibility for the adequacy or accuracy of this news release.
http://www.newswire.ca/en/releases/orgDisplay.cgi?okey=18055
New Rules to Put Squeeze on Shorts
Restrictions on Executing
Transactions Begin Friday;
Egg Firm to Hog Spotlight
By HENNY SENDER
Staff Reporter of THE WALL STREET JOURNAL
January 27, 2005
Cal-Maine Foods Inc. isn't a household name, but the obscure egg company, a favorite among short sellers, is being carefully watched by fund managers concerned about new Securities and Exchange Commission rules governing certain short sales.
Short sellers borrow shares and then sell the shares. They bet the share price will decline and they can then purchase the shares at lower prices to repay the loan. But sometimes shorts sell shares they haven't actually borrowed, a practice called "naked short selling ."
Since these short sales stem from nonexistent shares, the trades don't settle. The SEC's rules are aimed at curtailing potentially abusive or manipulative naked short selling by tracking the number of unsettled trades and then imposing limits on trading these shares.
SEC officials say previous rules work most of the time. But when market participants enter into naked short sales on a massive scale, they could have an endless supply of shares and "could drive down the price in an abusive or manipulative way," says James Brigagliano, assistant director in the SEC's Division of Market Regulation.
The new rules, which took effect Jan. 3, are complex. If at least 10,000 shares and 0.5% of the total shares outstanding of any company fail to be delivered for five trading days, they become "threshold securities." If 13 more trading days pass and the situation isn't corrected, then brokers can't execute any short sales for clients until they are certain of having the borrowed shares to sell. The first possible day such restrictions can come into effect is Friday, at which time, the exchanges are expected to place as many as 600 companies on their lists of companies that have short-sale restrictions. The exchanges are required to make the lists of such "threshold securities" public.
These lists would highlight shares in which short sellers are highly active. That, in turn, could prompt other investors to snap up shares of these companies, potentially causing a short squeeze. A squeeze occurs when buying pressure forces shorts to purchase and repay borrowed shares at higher and higher prices.
"The new rules can involve some pain for hedge funds who specialize in trading the securities of smallcap companies," says David Katz, a lawyer with Sidley Austin Brown & Wood LLP. One hedge fund manager characterizes it more dramatically as the beginning of a "hunting season on hedge funds which short."
The new rules stem from instances where short positions approach or even sometimes exceed the entire amount of known shares outstanding.
The new rules may also change the economics of the securities lending business. With more information about what shares are hard to borrow, fees could rise.
Cal-Maine, a Jackson, Miss.-based company which is the largest fresh-egg producer in the U.S., has recently seen demand for its eggs diminish. In its last fiscal quarter, the company posted a $5.3 million loss, compared with a profit of $17.6 million a year earlier.
Meanwhile, Cal-Maine's share price has been as volatile as consumers' choice of the diet du jour. Eighteen months ago, high-protein diets were the rage and Cal-Maine did well. Today, the trend has reversed and the shares have plunged and short interest has exploded. In the past 52 weeks, the stock has traded between $9.80 and $22.80 and is currently changing hands at about $11.40 on the Nasdaq Stock Market.
Six months ago, the short interest amounted to 66% of the total shares that trade freely, or the float. Today, the short interest has risen to more than 85% of shares available to the public, according to research from Merrill Lynch & Co. based on Nasdaq data. Fred Adams Jr., Cal-Maine's chief executive, attributes the short interest to a planned secondary offering that was later canceled and adds that "the intent of the regulation will cause fewer shorts in the future." Mr. Adams and his family control 70% of the voting rights of Cal-Maine.
Short sellers, unsure how the public lists will affect trading, may already be trying to close out positions ahead of Friday's deadline. "If I had good profits on my short position, I'd make sure I was out by Friday. If you get caught in a buy-in, you will lose," says William Rhodes, principal of Rhodes Analytics, referring to the way in which brokers close out customers' positions. "Better not be caught with your shorts around your ankle."
This quote from the WSJ piece says it all
"Since these short sales stem from nonexistent shares, the trades don't settle. The SEC's rules are aimed at curtailing potentially abusive or manipulative naked short selling by tracking the number of unsettled trades and then imposing limits on trading these shares.
SEC officials say previous rules work most of the time. But when market participants enter into naked short sales on a massive scale, they could have an endless supply of shares and "could drive down the price in an abusive or manipulative way," says James Brigagliano, assistant director in the SEC's Division of Market Regulation."
Has GEMM traded today?
Diamond ...
If you have any questions concerning that table of data I sent you earlier, you should find the answer here ...
http://stockhouse.ca/bullboards/viewmessage.asp?no=8901185&tableid=1
I deal through TD Waterhouse in Canada, I don't know Ameritrade's price for a broker assisted trade. As I said previously, TDW is an international broker and if I have trouble getting what I want on the PC they handle it for me buckshee.
I know ...
If you use a computer "discount broker" account it doesn't work. You have to phone a person ... an Ameritrade broker and explain to him you want to purchase a stock on the Toronto Exchange in Canada. He'll likely have to put the trade through TD Waterhouse which has branches in US and Canada.
I think you have to buy it on the Toronto Stock Exchange. It trades there by the symbol SGF.
You can follow it on this link which is delayed about 15 mins.
Punch SGF in the Get Quote Box ... top right.
http://tse.com/index.html
diamondintheruff,
I've got a strong hunch the pps is being kept down by a party interested in a takeover. When the valuations are announced, which I believe will be early February, I'm hoping it goes up lots ... coz I'm invested in SGF.
Those tabulated valuations are based on a single kimberlite pipe, the Star. From NRs we know Shore has other pipes too.
diamondintheruff ... here's a reasoned opinion.
The question was asked:
... Now if we say 400 million tonne resources, what will be the share price for a takeover? …
Comingman
See 1/3/05 post #8904095.
The following valuation estimates were excerpted from it:
............................................... Share Price ($ Canadian)
......................................... After ............ Buyout ............ Shore
.................................... Valuation ...... Late 2005 .......... Mine
Valuation ....................... 25% ................ 40% ............... 100%
Grade = 0.13 c/t
$75/c .............................. 0.44 ................ 0.71 ................ 0.16
$100/c ............................ 2.61 ................ 4.17 ................ 3.86
$125/c ............................ 4.77 ................ 7.63 ................ 9.89
$150/c ............................ 6.90 .............. 11.04 .............. 16.81
$175/c ............................ 9.06 .............. 14.50 .............. 24.34
$200/c .......................... 11.23 .............. 17.96 .............. 32.18
$225/c .......................... 13.39 .............. 21.42 .............. 40.22
$250/c .......................... 15.52 .............. 24.83 .............. 48.26
$275/c .......................... 17.68 .............. 28.29 .............. 56.53
$300/c .......................... 19.84 .............. 31.75 .............. 64.89
Grade = 0.17 c/t
$75/c .............................. 2.43 ................ 3.89 ................. 3.45
$100/c ............................ 5.26 ................ 8.41 ............... 11.41
$125/c ............................ 8.08 .............. 12.93 .............. 20.88
$150/c .......................... 10.88 .............. 17.41 .............. 30.90
$175/c .......................... 13.70 .............. 21.92 .............. 41.42
$200/c .......................... 16.53 .............. 26.45 .............. 52.12
$225/c .......................... 19.36 .............. 30.97 .............. 62.99
$250/c .......................... 22.15 .............. 35.44 .............. 73.82
$275/c .......................... 24.97 .............. 39.96 .............. 84.81
$300/c .......................... 27.80 .............. 44.88 .............. 95.92
- The stock prices in the above table are defined and calculated in the same manner as those in 1/3/05 09:36 post #8901185.
- Note that the Shore go-it-alone column reflects potential stock prices years down the road. Also, I would anticipate that the stock prices would actually be a little lower than those shown in the table above do to the need to issue additional stock to fund the prefeasibility study and other operational costs.
- I also caution, that in my opinion, the bulk sample probably has a higher grade and valuation than the average of the Star site as it was targeted for high diamond concentration.
- The minimum valuation required to economically justify the project is about:
$90/carat with a 0.13 carat/tonne grade
$70/carat with a 0.17 carat/tonne grade
Shorething
http://stockhouse.ca/bullboards/viewmessage.asp?no=8996754&tableid=0
Shore Gold looks ahead to Frebrary.
http://www.resourceinvestor.com/pebble.asp?relid=7955
Hit the "next" button - UC shows up a lot clearer.
They've got gold for the settings - next it's the diamonds.
http://www.cmkxpics.com/ecuador7/pages/DSC02565_0203_jpg.htm
How would one know the trades weren't reversed? The price was the same the following day - perhaps that's all it was, a reversal.
Just a left out a zero?
Ninch problemo, zero's nothing anyway ...
Shore Gold defending against takeover ...
http://stockhouse.ca/news/news.asp?tick=SGF&newsid=2610734
Shore Gold tops its carat target
2005-01-17 16:19 ET - Street Wire
by Will Purcell
Shore Gold Inc. has its 12th diamond parcel from a large bulk sample of its Star kimberlite. The latest haul produced an average grade that was somewhat lower than the most recent sets and there were fewer large diamonds in the mix. Such a combination might have triggered an adverse market reaction had it come last fall, but the numbers now have little impact on the company's full sample, which now tops 3,000 carats. Despite the lower recoveries, there are some encouraging aspects to the latest samples. That could bode well for the project.
The 12th set
Shore Gold processed another eight batches of kimberlite in its latest set, all from the 235-metre level of the mammoth pipe. The rock weighed about 2,257 tonnes and delivered 354.61 carats of diamonds, with nearly all the stones larger than a 1.18-millimetre sieve. That worked out to a grade of about 0.157 carat per tonne.
One of the diamonds exceeded five carats, weighing 5.15 carats. Most of Shore's earlier sets delivered stones significantly larger than that, and one contained two stones weighing more than 10 carats. Still, there were several larger diamonds in the latest eight batches of kimberlite. Shore recovered 11 stones weighing at least two carats and another 35 that topped the one-carat mark.
One clear sign that the latest set of samples had a less favourable size distribution was the average diamond weight, which was about 0.109 carat. That figure is about 15 per cent below the average of 0.127 carat for the entire kimberlite sample taken from the 235-metre level so far.
Nevertheless, the 12th set of samples still had a healthy size distribution. Just a bit less than one-quarter of the weight of the diamond parcel came from stones weighing at least one carat. About 10 per cent of the weight of the parcel came from stones weighing at least two carats.
Those proportions are significantly lower than the average for what Shore is getting from its early Joli Fou kimberlite, but they still compare favourably with many economic deposits. That favourable proportion of large diamonds is one reason that Shore Gold has particularly high hopes for the value of its Star diamonds.
Meanwhile, the breakdown of the individual sample grades within the latest set of samples continues to offer encouragement. That new hope is strongest in the area along its northern drive at the 235-metre level. Shore processed four batches of rock taken from the northern zone, weighing about 954 tonnes. That material produced 182.2 carats of diamonds, for a grade of about 0.191 carat per tonne. That handily topped what four batches from the southeastern zone produced. That rock weighed 1,302 tonnes and it delivered 172.4 carats, good for a grade of just 0.132 carat per tonne.
The stone size distribution was also markedly healthier in the latest samples from the north drive. The average diamond from the four northern batches weighed nearly 0.122 carat, while the four southeastern portions of kimberlite could muster an average stone weighing 0.098 carat.
The sample so far
Shore now has 3,093 carats from just under 22,000 tonnes of Star kimberlite, which results in an average grade of about 0.14 carat per tonne and an average diamond weight of 0.117 carat. Still, those average values do not reflect the major variation between the two main phases of kimberlite within the huge pipe.
The late Joli Fou kimberlite, which accounts for about 20 per cent of the Star kimberlite, lies in the uppermost parts of the body. Shore processed roughly 2,700 tonnes of that material to come up with about 65 carats from the low-grade phase. That worked out to a grade of about 0.024 carat per tonne and an average diamond weight of 0.062 carat.
Things are much better in the richer early Joli Fou phase. Shore recovered nearly 2,900 carats from 17,440 tonnes of the rock, which points to a grade of about 0.166 carat per tonne and an average diamond weight of 0.118 carat. The situation is even rosier with the rock coming from the 235-metre level. That area now accounts for 13,735 tonnes of the sample and 2,471 of the carats, which works out to a grade of 0.18 carat per tonne.
A hopeful twist
After several sets of samples, it seemed that the southeastern drive had the best grades by far, with some individual samples delivering grades above 0.3 carat per tonne. Meanwhile, the rock from the northern zone was lagging behind. That sparked concern that the inordinate amount of rock from the richer area might be inflating the grade of the sample.
The last few sets brought added signs that there is a higher-grade region to the north that Shore Gold is now sampling. As a result, there is now little difference between the averages for the two areas. Shore's southeastern sample accounts for nearly 9,100 tonnes of kimberlite. That rock has an average grade of about 0.184 carat and an average stone weight of 0.127 carat.
The material from the northern drive now accounts for about 4,650 tonnes of the company's sample. That kimberlite has an average grade of 0.172 carat and the average diamond weighs 0.127 carat, identical with the result from the southeastern zone.
There have been 18 batches of rock from the north, with grades that vary from about 0.1 carat per tonne to 0.25 carat per tonne. The 36 southeastern samples vary from 0.1 carat per tonne to a high of 0.33 carat per tonne. Most of the individual samples from both areas typically have grades falling within a range that varies from 0.12 carat per tonne to 0.18 carat per tonne. As a result, that range could be typical for a wider portion of the early Joli Fou kimberlite.
Meanwhile, some richer regions randomly scattered about the pipe could inflate the grade of the body in other areas. Isolated pockets of richer rock could make other parts of Star comparable with the southeastern region, just as now seems the case in the northern zone.
If so, that could bode well for the other parts of the pipe containing early Joli Fou kimberlite. Until recently, the kimberlite from the 235-metre level appeared to have a markedly better grade than the rock from Shore's shaft produced, but that could be the result of bad luck.
Shore processed 3,705 tonnes of early Joli Fou kimberlite taken from the shaft and stations. That rock yielded an average diamond grade of just 0.115 carat per tonne, with an average stones size of 0.086 carat. That grade was nearly 40 per cent lower than what the company recovered from the 235-metre drives, and the average stone size from the shaft rock lagged the 235-metre kimberlite by over 30 per cent.
At least some of that lower grade could be the result of bad luck. Ten individual samples came from the shaft, and their grades varied from just under 0.1 carat per tonne to nearly 0.16 carat per tonne. The lower figure is comparable with what Shore found at the 235-metre level and most of the shaft grades fall within the 0.12-to-0.18-carat-per-tonne range evident in the samples from the two drives.
Missing in the material from the shaft and stations are samples with significantly higher grades. That could obviously be due to the absence of high-grade zones elsewhere in the pipe, but it is equally possible that Shore just had some bad luck.
So far, about 30 per cent of the rock from the 235-metre level produced grades above 0.2 carat per tonne. If a comparable proportion of the shaft material subsequently yields a comparable result, the average grade of that sample would grow to about 0.15 carat per tonne.
Such an assumption is clearly risky at this stage. Still, it would be equally risky to assume that Shore's test of the early Joli Fou kimberlite is yielding an unrepresentatively high grade. Either way, it will take a considerable amount of delineation drilling to come up with a grade estimate beyond the confines of the current sample.
The value question
Something around the 0.16-carat-per-tonne average for the early Joli Fou material could wind up being representative of a fairly wide zone within the pipe. With a production grade near that mark and an average diamond value of more than $125 (U.S.) per carat, Shore's Star project would have an economically intriguing rock value above $20 (U.S.) per tonne.
Shore now hopes to reveal its diamond value in February, but even that mark could leave investors with questions. Shore now has 14 diamonds weighing more than seven carats and it would be reasonable to expect some of those stones to be valuable. The actual number of larger gems could significantly skew the diamond value, providing an unrealistic boost or a disappointing drag, depending on the luck of the draw.
For instance, De Beers Canada Corp. recovered a 10-carat gem worth $60,000 (U.S.) from one of its Gahcho Kue pipes, but the diamond giant discounted the find when it modelled its diamond value. Even one such stone in Shore's parcel could inflate the average value by $20 (U.S.) per carat. On the other hand, it is normal for most of the diamond value to come from a tiny proportion of the carat crop. As a result, some bad luck could result in an appraisal that is lower than a mine would produce.
The potential error between appraised and model values normally shrinks with larger diamond parcels, which is one reason that Shore collected its big bulk test. The appraisal of the Star diamonds will go a long way toward providing answers, but there may still be some wiggle room in the outcome. Meanwhile, although value remains a big unknown, the large diamonds are a source of encouragement.
Details on diamonds on the way
By Barry Glass/Herald Staff
Saturday, January 15, 2005
Only a few weeks are left until one of the biggest announcements about diamonds near Prince Albert is made.
Shore Gold Inc. has collected more than 3,000 carats of diamonds from its Fort a la Corne site. A valuation for the parcel will be made public in February.
George Read, senior vice-president of exploration, spoke at a Prince Albert and District Chamber of Commerce lunch Friday about the company’s progress and its outlook.
“It’s a very exciting time for Prince Albert,” he said.
Diamond deposits are judged on the average number of carats per hundred tonnes of ore, as well as on the average value per carat, he said. The parcel processed so far shows an average grade of about 14 carats per hundred tonnes.
Read estimated the value of one carat at US $125. But he said that figure, which he used for the sake of comparing Shore’s project to proven diamond resources, is probably a conservative one.
The value of the diamond parcel will be estimated by a number of independent experts and the figures released shortly after Shore has those results, said Read. If the results are favourable, Shore will move to the pre-feasibility stage. Assuming the property is eventually proven feasible, then a mine would be five years away, said Read.
“Shore Gold is making every effort to move this forward as quickly as possible,” he said.
He estimated a mine would have a minimum 20-year life if it goes ahead.
Chamber members asked whether local businesses are able to provide the support Shore needs.
“Certainly we have made an effort to source locally,” said Read.
He added that recently some high precision bolts were urgently needed for operations and Shore was able to get them machined in Prince Albert.
Almost all the people working on the site are from Saskatchewan, said Read.
Any new business that might develop here would depend on how investors and entrepreneurs respond in the event a mine is feasible, he said. A diamond cutting industry was developed in Yellowknife in response to diamond mines in the Northwest Territories, Read noted as an example.
What’s happening in Fort a la Corne is only a part of the diamond industry in the country.
“Canada is poised to become the world’s greatest diamond producer,” said Read. Canada is currently third in production in terms of value, behind Botswana and Russia, but could be number one in 15 to 20 years, said Read.
http://www.paherald.sk.ca/
Janice ... there must be some room left to express the truth.
Naked Short Selling Petition Status Report
Fellow Petitioners,
It has been some time since I have last updated you on the status of this petition. I will now try to do so as best I can.
For starters, I want to thank all who have come here and signed on to our battle. It is your signatures that are what makes this petition work. It is also these signatures that have, in my opinion, created the SEC's Regulation SHO that was released in June and implemented this January. Without your willingness to fight this battle we would never have seen any reforms at all and for that you should be proud.
Today is January 10, 2005 and today was to be the day we were all anticipating. We all expected our investments to show up on the "threshold security" list that was created with Regulation SHO. Instead we saw how low Wall Street and the regulators would go to lie, cheat, and steal to defraud us.
The NASDAQ "threshold security" list posted on the NASDAQ Web site was insulting. Somehow the NSCC and/or the NASDAQ suddenly erased the fails that have abused our investments for all these years and eliminated our investments from the list of mandatory close-out securities. Erased from the reported list were at least 350 securities that were reported to Wall Street only weeks earlier.
On December 13, 2004 the General Council at Bear Stearns informed members in a conference call that regulators had been voicing their concerns of short selling settlement failures and that broker-dealers, executing brokers, and clients had not been following established laws. To address this issue the SEC created Regulation SHO. Bear Stearns also identified at this time that the number of "would be threshold securities", as provided by the regulators, was a list of 1000+ companies. It was that list that the NSCC and/or NASDAQ suddenly manipulated to erase 350 OTCBB and Pink Sheet companies on January 10, 2005.
The reported list out of the NASDAQ identified that while the OTCBB may be the "wild west" of trading platforms, and is made up of a compilation of scam companies according to the SEC, it is also the most efficient platform with regards to settling trades. The percentage of OTCBB issuers that made the list, as representative of those eligible was far greater than any other trading exchange. In fact, it was near perfect with only 28 of 3100 companies on the list. It was also a fool's list. The Pink Sheets had 100% of eligible companies on the list and the OTCBB had .89%. Even the NYSE and NASDAQ could not get to .89% accuracy. It was a fraudulent list provided by Wall Street attempting to manipulate shareholders out of their investments and into the hands of those needing to cover fails.
Now more than ever we need your support. We need your efforts to seek out and bring in companies and investors to sign this petition. We need new names to make our case heard. We cannot have you sign multiple times, however as those signatures will not be counted and will be erased. We need people to step out and voice their displease.
Today Wall Street was not the only ones who have defrauded us. Today the SRO's and regulators who police Wall Street also defrauded us. They perjured themselves in a list that was inaccurate and manipulative. We need to bring this to the public by congressional investigations and we can only get there with signatures.
Thank-you in advance for making our cause known
Dave Patch
http://www.investigatethesec.com/index1.php
Naked Short Selling Petition Status Report
Fellow Petitioners,
It has been some time since I have last updated you on the status of this petition. I will now try to do so as best I can.
For starters, I want to thank all who have come here and signed on to our battle. It is your signatures that are what makes this petition work. It is also these signatures that have, in my opinion, created the SEC's Regulation SHO that was released in June and implemented this January. Without your willingness to fight this battle we would never have seen any reforms at all and for that you should be proud.
Today is January 10, 2005 and today was to be the day we were all anticipating. We all expected our investments to show up on the "threshold security" list that was created with Regulation SHO. Instead we saw how low Wall Street and the regulators would go to lie, cheat, and steal to defraud us.
The NASDAQ "threshold security" list posted on the NASDAQ Web site was insulting. Somehow the NSCC and/or the NASDAQ suddenly erased the fails that have abused our investments for all these years and eliminated our investments from the list of mandatory close-out securities. Erased from the reported list were at least 350 securities that were reported to Wall Street only weeks earlier.
On December 13, 2004 the General Council at Bear Stearns informed members in a conference call that regulators had been voicing their concerns of short selling settlement failures and that broker-dealers, executing brokers, and clients had not been following established laws. To address this issue the SEC created Regulation SHO. Bear Stearns also identified at this time that the number of "would be threshold securities", as provided by the regulators, was a list of 1000+ companies. It was that list that the NSCC and/or NASDAQ suddenly manipulated to erase 350 OTCBB and Pink Sheet companies on January 10, 2005.
The reported list out of the NASDAQ identified that while the OTCBB may be the "wild west" of trading platforms, and is made up of a compilation of scam companies according to the SEC, it is also the most efficient platform with regards to settling trades. The percentage of OTCBB issuers that made the list, as representative of those eligible was far greater than any other trading exchange. In fact, it was near perfect with only 28 of 3100 companies on the list. It was also a fool's list. The Pink Sheets had 100% of eligible companies on the list and the OTCBB had .89%. Even the NYSE and NASDAQ could not get to .89% accuracy. It was a fraudulent list provided by Wall Street attempting to manipulate shareholders out of their investments and into the hands of those needing to cover fails.
Now more than ever we need your support. We need your efforts to seek out and bring in companies and investors to sign this petition. We need new names to make our case heard. We cannot have you sign multiple times, however as those signatures will not be counted and will be erased. We need people to step out and voice their displease.
Today Wall Street was not the only ones who have defrauded us. Today the SRO's and regulators who police Wall Street also defrauded us. They perjured themselves in a list that was inaccurate and manipulative. We need to bring this to the public by congressional investigations and we can only get there with signatures.
Thank-you in advance for making our cause known
Dave Patch
http://www.investigatethesec.com/index1.php
Naked Short Selling Petition Status Report
Fellow Petitioners,
It has been some time since I have last updated you on the status of this petition. I will now try to do so as best I can.
For starters, I want to thank all who have come here and signed on to our battle. It is your signatures that are what makes this petition work. It is also these signatures that have, in my opinion, created the SEC's Regulation SHO that was released in June and implemented this January. Without your willingness to fight this battle we would never have seen any reforms at all and for that you should be proud.
Today is January 10, 2005 and today was to be the day we were all anticipating. We all expected our investments to show up on the "threshold security" list that was created with Regulation SHO. Instead we saw how low Wall Street and the regulators would go to lie, cheat, and steal to defraud us.
The NASDAQ "threshold security" list posted on the NASDAQ Web site was insulting. Somehow the NSCC and/or the NASDAQ suddenly erased the fails that have abused our investments for all these years and eliminated our investments from the list of mandatory close-out securities. Erased from the reported list were at least 350 securities that were reported to Wall Street only weeks earlier.
On December 13, 2004 the General Council at Bear Stearns informed members in a conference call that regulators had been voicing their concerns of short selling settlement failures and that broker-dealers, executing brokers, and clients had not been following established laws. To address this issue the SEC created Regulation SHO. Bear Stearns also identified at this time that the number of "would be threshold securities", as provided by the regulators, was a list of 1000+ companies. It was that list that the NSCC and/or NASDAQ suddenly manipulated to erase 350 OTCBB and Pink Sheet companies on January 10, 2005.
The reported list out of the NASDAQ identified that while the OTCBB may be the "wild west" of trading platforms, and is made up of a compilation of scam companies according to the SEC, it is also the most efficient platform with regards to settling trades. The percentage of OTCBB issuers that made the list, as representative of those eligible was far greater than any other trading exchange. In fact, it was near perfect with only 28 of 3100 companies on the list. It was also a fool's list. The Pink Sheets had 100% of eligible companies on the list and the OTCBB had .89%. Even the NYSE and NASDAQ could not get to .89% accuracy. It was a fraudulent list provided by Wall Street attempting to manipulate shareholders out of their investments and into the hands of those needing to cover fails.
Now more than ever we need your support. We need your efforts to seek out and bring in companies and investors to sign this petition. We need new names to make our case heard. We cannot have you sign multiple times, however as those signatures will not be counted and will be erased. We need people to step out and voice their displease.
Today Wall Street was not the only ones who have defrauded us. Today the SRO's and regulators who police Wall Street also defrauded us. They perjured themselves in a list that was inaccurate and manipulative. We need to bring this to the public by congressional investigations and we can only get there with signatures.
Thank-you in advance for making our cause known
Dave Patch
http://www.investigatethesec.com/index1.php
January 11, 2005. (FinancialWire) Regulation SHO, the U.S.
Securities and Exchange Commission effort to make a Federal case out of illegal naked short selling, is here, and it is turning a broad spotlight on brokerages’ failures to deliver stock certificates purchased from them by investors that appears to be much brighter and more intrusive than either the detractors had expected or perhaps the market makers used to minimal accountability had wanted.
That spotlight is dimming, however, as the over-the-counter list as of yesterday’s midnight deadline still inexplicably contained only 29 companies, including BICO, Inc. (OTCBB: BIKO), Freestar Technology (NASDAQ: FSRT), and Loral Space & Communications (OTCBB: LRLSQ). At the same time, David Simon of Schimatic Technology (OTC: SCTN) asked FinancialWire about the number of “fails to deliver” are associated with its listing.
Apparently, neither the SEC nor NASDAQ are providing the full transparency to the companies and their shareholders that they demand of the companies.
The lists, at http://www.nyse.com/threshold , http://www.nasdaqtrader.com/aspx/regsho.aspx , http://amex.com/amextrader , and elsewhere, initially showed 73 securities on the NYSE list, only 9 of which are U.S. companies, 70 securities on the AMEX list, 22 individual companies, and 374 stocks on the NASDAQ list, including 96 on the exchange, 29 OTCBB and 254 on the Pink Sheets.
NASDAQ initially missed its Friday night deadline, and Dow Jones’ (NYSE: DJ) Wall Street Journal said the list is “far from complete as it stands.” NASDAQ apparently had until noon yesterday to complete the list, but no changes were evident.
“NASDAQ Rule 11830 is identical to SHO except for market making exemptions. This data proves the NASD was not enforcing rule 11830 as the short positions continued to increase on the now ‘threshold securities’. Nobody was enforcing the mandatory close-outs,” alleged Dave Patch, of the website http://www.investigatethesec.com .
In an email to SEC and NASDAQ executives, Patch called the list so far a “fake.”
Regulation SHO was advertised as a solution to what some have said could be the biggest scandal in the history of the securities industry, and regulators have drawn significant fire from both sides of the short selling camp, although “naked” short selling, where short sellers have almost unlimited abilities to sell securities many times over the number of shares outstanding, has long supposed to have been illegal.
The controversy has drawn both legislative and judicial proponents and opponents, and until the Tsunami took over the news, General Electric’s (NYSE: GE) “Dateline” was said to be on the verge of a major expose that will reportedly touch on possible collusion between brokerages that are purportedly impossibly behind in their fails to deliver certificates, the Depository Trust Corporation, whose “Stock Borrow Program” reportedly garners it almost a billion dollars a year in fees for what detractors call “counterfeit trades,” and even the vaunted U.S. Securities and Exchange Commission itself, which makes a fee on every stock transaction, whether legitimate or not.
There is even a blog on the subject, at http://nakedshortingforum.blogspot.com/ .
A poster on the Yahoo (NASDAQ: YHOO) message boards said that due to the new threshold rules, now being implemented, “the pressure is on the market makers to do what is right because all eyes will be placed on them. There will be many key Federal Authorities, economists, mathematicians, etc. that are already lined up to be performing certain studies for historical purposes. All the MMs have to do to not make matters worse is to do what is right and fix what they had broken for years with any fully reporting company that’s a threshold security as soon as possible.”
The poster noted that a stock must be fully reporting and considered a threshold security. A threshold security is one where .5% of its outstanding shares (OS) have been proven to have been naked shorted for 5 consecutive trading days and where the MMs have failed to close out those positions for five consecutive trading days.
“Example: If stock ABCD had 2,000,000 shares outstanding and was a fully reporting company as of 3 Jan 05, the MMs would need to fail to close out the open naked shorted position of .5% of 2,000,000 shares which would equate to 10,000 shares not being “completely” covered for 5 consecutive trading days. This means that the MMs would need to make sure they don’t allow 5 consecutive days to happen where they leave any balance remaining of the 10,000 naked shorted shares as an open account of stock ABCD. They must ‘completely’ close all open accounts of naked shorted positions.
“When the supply of shares of a stock is zero, the supply is zero. It doesn’t matter how you get there, be it by a naked short position or by the float being absorbed. This is where it all starts as a short squeeze will now be formed and grows as demand to purchase shares increase. This is where the misperception exists with Regulation Sho. People think that a new naked short position has to be created for a stock to be eligible for protection and rectification under Regulation Sho. This is not true. It’s even better. All naked short positions of the past will not go away and must be dealt with. The clock begins ticking for covering, and means that any stock that has been naked shorted will automatically start out in a forced short squeeze mode that will only escalate the longer the MMs wait to cover.
“Any buying pressure will cause the increase of the naked shorted position to grow to begin approaching the 5 day consecutive window of not getting covered by the MMs. After the 5 days transpire where the MMs have failed to deliver and close the open naked shorted position, that stock in which they failed to deliver will be placed on a Threshold Security List for the public to view. This is where it starts to get awesome,” said the post.
“With no buying pressure, they won’t have to cover as soon as one might have hoped as shares are sold exceeding the amount of shares being bought for stock ABCD. Still, if they don’t cover the ‘entire’ naked short position for 5 consecutive days, stock ABCD will show up on the Threshold Security List for the public to view on 10 January.
“After such, the MMs have 13 days to close out the ‘entire’ naked shorted position or face being suspended and/or shut down from that security and other penalties to possibly put that MM out of business. The end result will still be the supply being zero and the stock would be forced to be traded correctly based on supply and demand with an already dried up supply. This means the creation of an instant short squeeze!”
The poster said that the market makers will need to get the naked shorted shares out of circulation by increasing the bid to entice shareholders to sell. “The problem comes when they allow for the buying to outweigh the selling due to increased demand for the stock. As orders are placed to buy shares, they must be filled by the MMs. This will worsen their problem when nobody is selling. As the MMs make the mistake and allow for any stock to be placed on the Threshold Security List, it will publicly reveal where the MMs are already having a problem in covering. Us as shareholders will see this list and contribute with forcing the short squeezes for every stock on the list.”
The recent Securities Industry of America symposium on Regulation SHO, which was supposed to curtail illegal naked short selling, only further deepened the U.S. Securities and Exchange Commission divide as a dramatic – some say startling – new 22-page working paper, “Strategic Delivery Failures in U.S. Equity Markets,” was published.
Moderators at the symposium included Steven Kessler, Associate General Counsel for Goldman Sachs & Co. (NYSE: GS), and Deborah Mittelman, Deputy Director of Global Compliance for Reuters’ (NASDAQ: RTRSY) Instinet. Panelists included Jeffrey Bernstein, Senior Managing Director of Bear Stearns (NYSE: BSC), and Robert O’Connor, Executive Director of the Law Department for Morgan Stanley (NYSE: MWD).
The referenced working paper by University of New Mexico Professor Leslie Boni was initiated while the author was visiting financial economist at the SEC.
She termed the “failures to deliver,” which litigants have called “counterfeiting,” as being “pervasive.”
The professor said that a whopping 42% of listed stocks at the New York Stock Exchange, NASDAQ and AMEX, and 47% of unlisted stocks in the OTCBB and Pink Sheets had persistent fails of 5 days or more with 4% being above the SEC’s threshold limits for failures.
The standard for settlement is presently 3 days with a concept proposal by the SEC in comment to reduce 3 day settlement to 1 day, noted Patch.
The economist pointed to a study conducted by Evans, Geczy, Musto, and Reed in 2003 that provided evidence that while the SRO’s have buy-in requirements, such buy-ins almost never occur. She noted that an audit of one market maker showed that all or a portion of shares in 69,063 transactions during 1998-1999 were “fails to deliver.”
“The market maker was bought-in on only 86 of these positions,” she stated.
Dave Patch, editor of “Stockgate Today,” said that his own review of the Securities Acts of 1933 and 1934 finds no reference to “strategic failures.” In fact, he said, Section 17a of the 1934 act “mandates prompt and accurate clearance and settlement of trades, and the admission of Strategic Failures is also in direct violation of Rule 15c6-1.”
Rule 15c6-1 defines the settlement cycle for trades executed and states that no Broker Dealer may enter into a contract for the sale of a security whereby the payment for that security and the delivery of that security is greater than 3 business days. For market making activities there is a slight exemption from the delivery in a Bona Fide Market Making activity but as the SEC and SRO’s have repeatedly stated, Bona Fide Market making is not simply supporting the best offer in a naked short sale without also representing the best bid or near best bid in a long trade. They must be actively making a market on both sides of trading to use the exemption, noted Patch.
Delegates to the September 20 annual SEC Forum on Small Business passed several resolutions on the issue to be submitted to the SEC. Among them were:
1. Extend Reg. SHO to apply to all publicly traded companies including non-reporting companies.
2. Recommend that the SEC Commissioners reinstate the proposed provision in Regulation SHO that prohibited a selling shareholder from withdrawing his/her profits from the trade until after delivery of the underlying sold shares.
3. SEC should require all SROs, and any clearinghouse for an SRO that receives securities into accounts for security holders to disclose the fact of the ability to loan the securities in the accounts and allow security holders to opt out of allowing the securities to be loaned.
Robert Shapiro, chair of Sonecon LLC, an economic advisory firm and former Under Secretary of Commerce from 1998 to 2001 and principal economic advisor to President William Clinton in his 1992 campaign, has expressed “serious concerns about the impact of the final version of Regulation SHO regarding short sales on the equity and transparency of our equity markets.”
Shapiro holds a Ph.D. from Harvard University and has been a Fellow of the National Bureau of Economic Research, the Brookings Institution, and Harvard University.
Shapiro said the SEC is correct to broaden the terms of regulation of short sales, and applauded the section directing broker dealers to mark all equity orders as “long,” “short” or “short exempt.” More important, he said, the new “locate and delivery” requirements could substantially reduce stock manipulation carried out through naked short sales -- but only if those requirements are widely applied and strictly enforced.
“Unfortunately, Regulation SHO does not meet either of these two standards. The troubling result is that the Regulation, in effect, establishes an official level of tolerance for unsettled or naked short sales,” Shapiro charged.
Shapiro said he strongly concurs with the comments of the North American Securities Administrators Association (NASAA) on the draft rule, which said NASAA was “unable to determine why the Commission proposes to permit significant settlement failures at all. While there are instances when settlement may be legitimately delayed, existing regulations provide for extensions for settlement. If the Commission continues to allow settlement failures, it may well facilitate the harm that the proposal is designed to remedy.”
“Until Regulation SHO, this economic counterfeiting has been facilitated by electronic record keeping and the apparent practice of the DTCC and its subsidiary National Securities Clearing Corporation (NSCC) of often disregarding persistent unsettled short positions. With Regulation SHO, the SEC has provided its implicit imprimatur for the same practice in cases covering the vast majority of public companies and billions of dollars.”
Shapiro urged the SEC to “reconsider the provisions of Regulations SHO and, at a minimum, apply the ‘locate and delivery’ requirements for threshold securities to all short sale transactions, and adopt a zero-tolerance policy for significant settlement failures. American investors should feel confident that the SEC will ensure the integrity of every equity transaction they undertake and fully protect their right to receive what they have paid for.”
Twenty civil cases have now been filed by O'Quinn, Laminack & Pirtle, Christian Smith & Jewell, and Heard, Robins, Cloud, Lubel & Greenwood, LLP, all of Houston, Texas. The consortium of law firms, famed for the giant awards they obtained suing tobacco companies. The group recently brought suit against the Depository Trust and Clearing Corp. for allegedly participating in the short-selling conspiracy through its “stock borrow” program which the attorneys say is nothing more than an illegal electronic printing press for stock certificates.
Lead counsel John O'Quinn said: "We are committed to the relentless pursuit of justice.”
In comments to the U.S. Securities and Exchange Commission, C. Austin Burrell, who is providing litigation support and research for the law firms, said that StockGate is more massive than anyone may have imagined. “Illegal Naked Short Selling has stripped hundreds of billions, if not TRILLIONS, of dollars from American investors,” and have resulted in over 7,000 public companies having been “shorted out of existence over the past six years.” Burrell said some experts believe as much as $1 trillion to $3 trillion has been lost to this practice.
He stated that the restrictions on short selling were deliberately put into the Securities Acts of 1933 and 1934 because of the first-hand evidence then available that the “sheer scale of the crashes was a direct result of intentional manipulation of US markets through abusive short selling by a massive conspiracy.”
Burrell noted that the 65-lawyer team presided over by lead lawyers Wes Christian and John O’Quinn has uncovered more than 1,200 hedge fund and offshore accounts working through more than 150 broker-dealers and market makers in a joint cooperative effort to strip small and medium size public companies of their value.
According to lawyer Christian, et.al., the DTC is at the very heart of the problem, and has almost a billion dollars a year at stake in keeping the problem.
The Depository Trust Company (DTC) is a member of the U.S. Federal Reserve System, a limited-purpose trust company under New York State banking law and a registered clearing agency with the SEC. The depository supposedly brings efficiency to the securities industry by retaining custody of some 2 million securities issues, effectively "dematerializing" most of them so that they exist only as electronic files rather than as countless pieces of paper. The depository also provides the services necessary for the maintenance of the securities it has in “custody.”
According to the suit, the DTCC has an enormous pecuniary and conflicted interest in the entire short selling scandal through the huge income stream they were realizing from it every day. They have made literally billions of dollars lending individual real shares, in most cases over and over, getting a fee each time they made a journal entry in the “Stock Borrow Program.”
The Stock Borrow Program was purportedly set up to facilitate expedited clearance of stock trades. Somewhere along the line, the DTCC became aware that if it could lend a single share an unlimited number of times, it could collect a fee each time, according to Burrell. “There are numerous cases of a single share being lent ten or many more times,” giving rise to the complaint that the DTCC has been electronically counterfeiting just as was done via printed certificates before the Crash.
“Such re-hypothecation has in effect made the potential ‘float’ in a single company's shares virtually unlimited and the term ‘float’ meaningless. Shares could be electronically created/counterfeited/kited without a registration statement being filed, and without the underlying company having any knowledge such shares are being sold or even in existence.” Burrell said the Christian/O’Quinn lawsuits will seek to show that the “counterfeiting/creation of unregistered shares is a specific violation of the Securities Act of 1933, barring the ‘Sale of Unregistered Securities’.”
One lawsuit alleges that the DTC has a colossal disincentive to stop the “stock borrow” program, booking revenues from services of $425,416,000 and similarly, the NSCC deriving revenues of $293,133,000.
Further, the suit alleges that “open positions” resulting from this activity at the close of business on December 31, 2003, “approximated $3,025,467,000” due to NSCC, and $2,303,717,000 due by NSCC, and unsettled positions of $721,750,000 for securities borrowed through the NSCC’s “Stock Borrow Program.” The largely unregulated DTC has become something of a defacto Czar presiding over the entire U.S. markets system, wielding more day-to-day influence and control than the SEC, the NASD and NASDAQ combined.
The Depository Trust and Clearing Corp.’s two preferred shareholders are the New York Stock Exchange and the NASD, a regulatory agency that also owns the NASDAQ (OTCBB: NDAQ) and the embattled American Stock Exchange!
In an era when corporate governance is the primary interest for the SEC and state regulators, the DTCC is hardly a role model. Its 21 directors represent a virtual litany of conflict:
They include Bradley Abelow, Managing Director, Goldman Sachs (NYSE: GS); Jonathan E. Beyman, Chief Information Officer, Lehman Brothers (NYSE: LEH); Frank J. Bisignano, Chief Administrative Officer and Senior Executive Vice President, Citigroup / Solomon Smith Barney's Corporate Investment Bank (NYSE: C); Michael C. Bodson, Managing Director, Morgan Stanley (NYSE: MWD); Gary Bullock, Global Head of Logistics, Infrastructure, UBS Investment Bank (NYSE: UBS); Stephen P. Casper, Managing Director and Chief Operating Officer, Fischer Francis Trees & Watts, Inc.; Jill M. Considine,Chairman, President & Chief Executive Officer, The Depository Trust & Clearing Corporation (DTCC);
Also, Paul F. Costello, President, Business Services Group, Wachovia Securities (NYSE: WB); John W. Cummings, Senior Vice President & Head of Global Technology & Services, Merrill Lynch & Co. (NYSE: MER); Donald F. Donahue, Chief Operating Officer, The Depository Trust & Clearing Corporation (DTCC); Norman Eaker, General Partner, Edward Jones; George Hrabovsky, President, Alliance Global Investors Service; Catherine R. Kinney, President and Co-Chief Operating Officer, New York Stock Exchange; Thomas J. McCrossan, Executive Vice President, State Street Corporation (NYSE: STT); Eileen K. Murray, Managing Director, Credit Suisse First Boston (NYSE: CSR); James P. Palermo, Vice Chairman, Mellon Financial Corporation (NYSE: MEL); Thomas J. Perna, Senior Executive Vice President, Financial Companies Services Sector of The Bank of New York (NYSE: BNY); Ronald Purpora, Chief Executive Officer, Garban LLC; Douglas Shulman, President, Regulatory Services and Operations, NASD; and Thompson M. Swayne, Executive Vice President, JPMorgan Chase (NYSE: JPM).
In their comments to the SEC regarding Regulation SHO in January, the 50 state regulators, through their association, the North American Association of Securities Administrators (NASAA) issued what many consider to be a strong warning that if the DTC is not dealt with in the final regulations, state regulators such as New York State Attorney General Eliot Spitzer may step to the plate.
In what many considered to have been explosive comments, Ralph Lambiase, NASAA president and Director of the Connecticut Division of Securities, warned "NASAA urges the Commission to reconsider its stance regarding the role of the Depository Trust and Clearing Corporation (the DTC). As a threshold matter, NASAA believes that the Commission should explicitly prohibit the DTC from lending more shares of a security than it actually holds. The ability of the overall proposed rule would be severely impared unless the Commission undertakes to implement such a prohibition.”
The new “threshold lists” could make for an interesting January, and possibly, an interesting 2005.
For up-to-the-minute news, features and links click on http://www.FinancialWire).net
FinancialWire) is an independent, proprietary news service of Investrend Information, a division of Investrend Communications, Inc. It is not a press release service and receives no compensation for its news or opinions. Other divisions of Investrend, however, provide shareholder empowerment platforms such as forums, independent research and webcasting. For more information or to receive the FirstAlert daily summary of news, commentary, research reports, webcasts, events and conference calls, click on http://www.investrend.com/contact.asp
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January 11, 2005. (FinancialWire) Regulation SHO, the U.S.
Securities and Exchange Commission effort to make a Federal case out of illegal naked short selling, is here, and it is turning a broad spotlight on brokerages’ failures to deliver stock certificates purchased from them by investors that appears to be much brighter and more intrusive than either the detractors had expected or perhaps the market makers used to minimal accountability had wanted.
That spotlight is dimming, however, as the over-the-counter list as of yesterday’s midnight deadline still inexplicably contained only 29 companies, including BICO, Inc. (OTCBB: BIKO), Freestar Technology (NASDAQ: FSRT), and Loral Space & Communications (OTCBB: LRLSQ). At the same time, David Simon of Schimatic Technology (OTC: SCTN) asked FinancialWire about the number of “fails to deliver” are associated with its listing.
Apparently, neither the SEC nor NASDAQ are providing the full transparency to the companies and their shareholders that they demand of the companies.
The lists, at http://www.nyse.com/threshold , http://www.nasdaqtrader.com/aspx/regsho.aspx , http://amex.com/amextrader , and elsewhere, initially showed 73 securities on the NYSE list, only 9 of which are U.S. companies, 70 securities on the AMEX list, 22 individual companies, and 374 stocks on the NASDAQ list, including 96 on the exchange, 29 OTCBB and 254 on the Pink Sheets.
NASDAQ initially missed its Friday night deadline, and Dow Jones’ (NYSE: DJ) Wall Street Journal said the list is “far from complete as it stands.” NASDAQ apparently had until noon yesterday to complete the list, but no changes were evident.
“NASDAQ Rule 11830 is identical to SHO except for market making exemptions. This data proves the NASD was not enforcing rule 11830 as the short positions continued to increase on the now ‘threshold securities’. Nobody was enforcing the mandatory close-outs,” alleged Dave Patch, of the website http://www.investigatethesec.com .
In an email to SEC and NASDAQ executives, Patch called the list so far a “fake.”
Regulation SHO was advertised as a solution to what some have said could be the biggest scandal in the history of the securities industry, and regulators have drawn significant fire from both sides of the short selling camp, although “naked” short selling, where short sellers have almost unlimited abilities to sell securities many times over the number of shares outstanding, has long supposed to have been illegal.
The controversy has drawn both legislative and judicial proponents and opponents, and until the Tsunami took over the news, General Electric’s (NYSE: GE) “Dateline” was said to be on the verge of a major expose that will reportedly touch on possible collusion between brokerages that are purportedly impossibly behind in their fails to deliver certificates, the Depository Trust Corporation, whose “Stock Borrow Program” reportedly garners it almost a billion dollars a year in fees for what detractors call “counterfeit trades,” and even the vaunted U.S. Securities and Exchange Commission itself, which makes a fee on every stock transaction, whether legitimate or not.
There is even a blog on the subject, at http://nakedshortingforum.blogspot.com/ .
A poster on the Yahoo (NASDAQ: YHOO) message boards said that due to the new threshold rules, now being implemented, “the pressure is on the market makers to do what is right because all eyes will be placed on them. There will be many key Federal Authorities, economists, mathematicians, etc. that are already lined up to be performing certain studies for historical purposes. All the MMs have to do to not make matters worse is to do what is right and fix what they had broken for years with any fully reporting company that’s a threshold security as soon as possible.”
The poster noted that a stock must be fully reporting and considered a threshold security. A threshold security is one where .5% of its outstanding shares (OS) have been proven to have been naked shorted for 5 consecutive trading days and where the MMs have failed to close out those positions for five consecutive trading days.
“Example: If stock ABCD had 2,000,000 shares outstanding and was a fully reporting company as of 3 Jan 05, the MMs would need to fail to close out the open naked shorted position of .5% of 2,000,000 shares which would equate to 10,000 shares not being “completely” covered for 5 consecutive trading days. This means that the MMs would need to make sure they don’t allow 5 consecutive days to happen where they leave any balance remaining of the 10,000 naked shorted shares as an open account of stock ABCD. They must ‘completely’ close all open accounts of naked shorted positions.
“When the supply of shares of a stock is zero, the supply is zero. It doesn’t matter how you get there, be it by a naked short position or by the float being absorbed. This is where it all starts as a short squeeze will now be formed and grows as demand to purchase shares increase. This is where the misperception exists with Regulation Sho. People think that a new naked short position has to be created for a stock to be eligible for protection and rectification under Regulation Sho. This is not true. It’s even better. All naked short positions of the past will not go away and must be dealt with. The clock begins ticking for covering, and means that any stock that has been naked shorted will automatically start out in a forced short squeeze mode that will only escalate the longer the MMs wait to cover.
“Any buying pressure will cause the increase of the naked shorted position to grow to begin approaching the 5 day consecutive window of not getting covered by the MMs. After the 5 days transpire where the MMs have failed to deliver and close the open naked shorted position, that stock in which they failed to deliver will be placed on a Threshold Security List for the public to view. This is where it starts to get awesome,” said the post.
“With no buying pressure, they won’t have to cover as soon as one might have hoped as shares are sold exceeding the amount of shares being bought for stock ABCD. Still, if they don’t cover the ‘entire’ naked short position for 5 consecutive days, stock ABCD will show up on the Threshold Security List for the public to view on 10 January.
“After such, the MMs have 13 days to close out the ‘entire’ naked shorted position or face being suspended and/or shut down from that security and other penalties to possibly put that MM out of business. The end result will still be the supply being zero and the stock would be forced to be traded correctly based on supply and demand with an already dried up supply. This means the creation of an instant short squeeze!”
The poster said that the market makers will need to get the naked shorted shares out of circulation by increasing the bid to entice shareholders to sell. “The problem comes when they allow for the buying to outweigh the selling due to increased demand for the stock. As orders are placed to buy shares, they must be filled by the MMs. This will worsen their problem when nobody is selling. As the MMs make the mistake and allow for any stock to be placed on the Threshold Security List, it will publicly reveal where the MMs are already having a problem in covering. Us as shareholders will see this list and contribute with forcing the short squeezes for every stock on the list.”
The recent Securities Industry of America symposium on Regulation SHO, which was supposed to curtail illegal naked short selling, only further deepened the U.S. Securities and Exchange Commission divide as a dramatic – some say startling – new 22-page working paper, “Strategic Delivery Failures in U.S. Equity Markets,” was published.
Moderators at the symposium included Steven Kessler, Associate General Counsel for Goldman Sachs & Co. (NYSE: GS), and Deborah Mittelman, Deputy Director of Global Compliance for Reuters’ (NASDAQ: RTRSY) Instinet. Panelists included Jeffrey Bernstein, Senior Managing Director of Bear Stearns (NYSE: BSC), and Robert O’Connor, Executive Director of the Law Department for Morgan Stanley (NYSE: MWD).
The referenced working paper by University of New Mexico Professor Leslie Boni was initiated while the author was visiting financial economist at the SEC.
She termed the “failures to deliver,” which litigants have called “counterfeiting,” as being “pervasive.”
The professor said that a whopping 42% of listed stocks at the New York Stock Exchange, NASDAQ and AMEX, and 47% of unlisted stocks in the OTCBB and Pink Sheets had persistent fails of 5 days or more with 4% being above the SEC’s threshold limits for failures.
The standard for settlement is presently 3 days with a concept proposal by the SEC in comment to reduce 3 day settlement to 1 day, noted Patch.
The economist pointed to a study conducted by Evans, Geczy, Musto, and Reed in 2003 that provided evidence that while the SRO’s have buy-in requirements, such buy-ins almost never occur. She noted that an audit of one market maker showed that all or a portion of shares in 69,063 transactions during 1998-1999 were “fails to deliver.”
“The market maker was bought-in on only 86 of these positions,” she stated.
Dave Patch, editor of “Stockgate Today,” said that his own review of the Securities Acts of 1933 and 1934 finds no reference to “strategic failures.” In fact, he said, Section 17a of the 1934 act “mandates prompt and accurate clearance and settlement of trades, and the admission of Strategic Failures is also in direct violation of Rule 15c6-1.”
Rule 15c6-1 defines the settlement cycle for trades executed and states that no Broker Dealer may enter into a contract for the sale of a security whereby the payment for that security and the delivery of that security is greater than 3 business days. For market making activities there is a slight exemption from the delivery in a Bona Fide Market Making activity but as the SEC and SRO’s have repeatedly stated, Bona Fide Market making is not simply supporting the best offer in a naked short sale without also representing the best bid or near best bid in a long trade. They must be actively making a market on both sides of trading to use the exemption, noted Patch.
Delegates to the September 20 annual SEC Forum on Small Business passed several resolutions on the issue to be submitted to the SEC. Among them were:
1. Extend Reg. SHO to apply to all publicly traded companies including non-reporting companies.
2. Recommend that the SEC Commissioners reinstate the proposed provision in Regulation SHO that prohibited a selling shareholder from withdrawing his/her profits from the trade until after delivery of the underlying sold shares.
3. SEC should require all SROs, and any clearinghouse for an SRO that receives securities into accounts for security holders to disclose the fact of the ability to loan the securities in the accounts and allow security holders to opt out of allowing the securities to be loaned.
Robert Shapiro, chair of Sonecon LLC, an economic advisory firm and former Under Secretary of Commerce from 1998 to 2001 and principal economic advisor to President William Clinton in his 1992 campaign, has expressed “serious concerns about the impact of the final version of Regulation SHO regarding short sales on the equity and transparency of our equity markets.”
Shapiro holds a Ph.D. from Harvard University and has been a Fellow of the National Bureau of Economic Research, the Brookings Institution, and Harvard University.
Shapiro said the SEC is correct to broaden the terms of regulation of short sales, and applauded the section directing broker dealers to mark all equity orders as “long,” “short” or “short exempt.” More important, he said, the new “locate and delivery” requirements could substantially reduce stock manipulation carried out through naked short sales -- but only if those requirements are widely applied and strictly enforced.
“Unfortunately, Regulation SHO does not meet either of these two standards. The troubling result is that the Regulation, in effect, establishes an official level of tolerance for unsettled or naked short sales,” Shapiro charged.
Shapiro said he strongly concurs with the comments of the North American Securities Administrators Association (NASAA) on the draft rule, which said NASAA was “unable to determine why the Commission proposes to permit significant settlement failures at all. While there are instances when settlement may be legitimately delayed, existing regulations provide for extensions for settlement. If the Commission continues to allow settlement failures, it may well facilitate the harm that the proposal is designed to remedy.”
“Until Regulation SHO, this economic counterfeiting has been facilitated by electronic record keeping and the apparent practice of the DTCC and its subsidiary National Securities Clearing Corporation (NSCC) of often disregarding persistent unsettled short positions. With Regulation SHO, the SEC has provided its implicit imprimatur for the same practice in cases covering the vast majority of public companies and billions of dollars.”
Shapiro urged the SEC to “reconsider the provisions of Regulations SHO and, at a minimum, apply the ‘locate and delivery’ requirements for threshold securities to all short sale transactions, and adopt a zero-tolerance policy for significant settlement failures. American investors should feel confident that the SEC will ensure the integrity of every equity transaction they undertake and fully protect their right to receive what they have paid for.”
Twenty civil cases have now been filed by O'Quinn, Laminack & Pirtle, Christian Smith & Jewell, and Heard, Robins, Cloud, Lubel & Greenwood, LLP, all of Houston, Texas. The consortium of law firms, famed for the giant awards they obtained suing tobacco companies. The group recently brought suit against the Depository Trust and Clearing Corp. for allegedly participating in the short-selling conspiracy through its “stock borrow” program which the attorneys say is nothing more than an illegal electronic printing press for stock certificates.
Lead counsel John O'Quinn said: "We are committed to the relentless pursuit of justice.”
In comments to the U.S. Securities and Exchange Commission, C. Austin Burrell, who is providing litigation support and research for the law firms, said that StockGate is more massive than anyone may have imagined. “Illegal Naked Short Selling has stripped hundreds of billions, if not TRILLIONS, of dollars from American investors,” and have resulted in over 7,000 public companies having been “shorted out of existence over the past six years.” Burrell said some experts believe as much as $1 trillion to $3 trillion has been lost to this practice.
He stated that the restrictions on short selling were deliberately put into the Securities Acts of 1933 and 1934 because of the first-hand evidence then available that the “sheer scale of the crashes was a direct result of intentional manipulation of US markets through abusive short selling by a massive conspiracy.”
Burrell noted that the 65-lawyer team presided over by lead lawyers Wes Christian and John O’Quinn has uncovered more than 1,200 hedge fund and offshore accounts working through more than 150 broker-dealers and market makers in a joint cooperative effort to strip small and medium size public companies of their value.
According to lawyer Christian, et.al., the DTC is at the very heart of the problem, and has almost a billion dollars a year at stake in keeping the problem.
The Depository Trust Company (DTC) is a member of the U.S. Federal Reserve System, a limited-purpose trust company under New York State banking law and a registered clearing agency with the SEC. The depository supposedly brings efficiency to the securities industry by retaining custody of some 2 million securities issues, effectively "dematerializing" most of them so that they exist only as electronic files rather than as countless pieces of paper. The depository also provides the services necessary for the maintenance of the securities it has in “custody.”
According to the suit, the DTCC has an enormous pecuniary and conflicted interest in the entire short selling scandal through the huge income stream they were realizing from it every day. They have made literally billions of dollars lending individual real shares, in most cases over and over, getting a fee each time they made a journal entry in the “Stock Borrow Program.”
The Stock Borrow Program was purportedly set up to facilitate expedited clearance of stock trades. Somewhere along the line, the DTCC became aware that if it could lend a single share an unlimited number of times, it could collect a fee each time, according to Burrell. “There are numerous cases of a single share being lent ten or many more times,” giving rise to the complaint that the DTCC has been electronically counterfeiting just as was done via printed certificates before the Crash.
“Such re-hypothecation has in effect made the potential ‘float’ in a single company's shares virtually unlimited and the term ‘float’ meaningless. Shares could be electronically created/counterfeited/kited without a registration statement being filed, and without the underlying company having any knowledge such shares are being sold or even in existence.” Burrell said the Christian/O’Quinn lawsuits will seek to show that the “counterfeiting/creation of unregistered shares is a specific violation of the Securities Act of 1933, barring the ‘Sale of Unregistered Securities’.”
One lawsuit alleges that the DTC has a colossal disincentive to stop the “stock borrow” program, booking revenues from services of $425,416,000 and similarly, the NSCC deriving revenues of $293,133,000.
Further, the suit alleges that “open positions” resulting from this activity at the close of business on December 31, 2003, “approximated $3,025,467,000” due to NSCC, and $2,303,717,000 due by NSCC, and unsettled positions of $721,750,000 for securities borrowed through the NSCC’s “Stock Borrow Program.” The largely unregulated DTC has become something of a defacto Czar presiding over the entire U.S. markets system, wielding more day-to-day influence and control than the SEC, the NASD and NASDAQ combined.
The Depository Trust and Clearing Corp.’s two preferred shareholders are the New York Stock Exchange and the NASD, a regulatory agency that also owns the NASDAQ (OTCBB: NDAQ) and the embattled American Stock Exchange!
In an era when corporate governance is the primary interest for the SEC and state regulators, the DTCC is hardly a role model. Its 21 directors represent a virtual litany of conflict:
They include Bradley Abelow, Managing Director, Goldman Sachs (NYSE: GS); Jonathan E. Beyman, Chief Information Officer, Lehman Brothers (NYSE: LEH); Frank J. Bisignano, Chief Administrative Officer and Senior Executive Vice President, Citigroup / Solomon Smith Barney's Corporate Investment Bank (NYSE: C); Michael C. Bodson, Managing Director, Morgan Stanley (NYSE: MWD); Gary Bullock, Global Head of Logistics, Infrastructure, UBS Investment Bank (NYSE: UBS); Stephen P. Casper, Managing Director and Chief Operating Officer, Fischer Francis Trees & Watts, Inc.; Jill M. Considine,Chairman, President & Chief Executive Officer, The Depository Trust & Clearing Corporation (DTCC);
Also, Paul F. Costello, President, Business Services Group, Wachovia Securities (NYSE: WB); John W. Cummings, Senior Vice President & Head of Global Technology & Services, Merrill Lynch & Co. (NYSE: MER); Donald F. Donahue, Chief Operating Officer, The Depository Trust & Clearing Corporation (DTCC); Norman Eaker, General Partner, Edward Jones; George Hrabovsky, President, Alliance Global Investors Service; Catherine R. Kinney, President and Co-Chief Operating Officer, New York Stock Exchange; Thomas J. McCrossan, Executive Vice President, State Street Corporation (NYSE: STT); Eileen K. Murray, Managing Director, Credit Suisse First Boston (NYSE: CSR); James P. Palermo, Vice Chairman, Mellon Financial Corporation (NYSE: MEL); Thomas J. Perna, Senior Executive Vice President, Financial Companies Services Sector of The Bank of New York (NYSE: BNY); Ronald Purpora, Chief Executive Officer, Garban LLC; Douglas Shulman, President, Regulatory Services and Operations, NASD; and Thompson M. Swayne, Executive Vice President, JPMorgan Chase (NYSE: JPM).
In their comments to the SEC regarding Regulation SHO in January, the 50 state regulators, through their association, the North American Association of Securities Administrators (NASAA) issued what many consider to be a strong warning that if the DTC is not dealt with in the final regulations, state regulators such as New York State Attorney General Eliot Spitzer may step to the plate.
In what many considered to have been explosive comments, Ralph Lambiase, NASAA president and Director of the Connecticut Division of Securities, warned "NASAA urges the Commission to reconsider its stance regarding the role of the Depository Trust and Clearing Corporation (the DTC). As a threshold matter, NASAA believes that the Commission should explicitly prohibit the DTC from lending more shares of a security than it actually holds. The ability of the overall proposed rule would be severely impared unless the Commission undertakes to implement such a prohibition.”
The new “threshold lists” could make for an interesting January, and possibly, an interesting 2005.
For up-to-the-minute news, features and links click on http://www.FinancialWire).net
FinancialWire) is an independent, proprietary news service of Investrend Information, a division of Investrend Communications, Inc. It is not a press release service and receives no compensation for its news or opinions. Other divisions of Investrend, however, provide shareholder empowerment platforms such as forums, independent research and webcasting. For more information or to receive the FirstAlert daily summary of news, commentary, research reports, webcasts, events and conference calls, click on http://www.investrend.com/contact.asp
Listen to StreetSignals™ (Investrend "ON-THE-AIR") "live" Saturdays from 9 p.m. to 10 p.m. on Business TalkRadio Network stations coast-to-coast, or right now on the web at http://www.StreetSignals.com
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Regulation SHO Spotlight Suddenly Turns Bright Lights On Illegal Naked Short Selling.
http://www.investors.com/breakingnews.asp?journalid=24896164&brk=1
Exposed ...
http://www.investors.com/breakingnews.asp?journalid=24896164&brk=1
Regulation SHO Spotlight Suddenly Turns Bright Lights On Illegal Naked Short Selling
Jan 10, 2005 (financialwire.net via COMTEX) -- (FinancialWire) Regulation SHO, the U.S. Securities and Exchange Commission effort to make a Federal case out of illegal naked short selling, is here, and it is turning a broad spotlight on brokerages' failures to deliver stock certificates purchased from them by investors that appears to be much brighter and more intrusive than either the detractors had expected or perhaps the market makers used to minimal accountability had wanted.
As of press deadline almost 500 public companies, including Delta Air Lines (DAL), Taser International (TASR), Netflix (NFLX), and Isonics (ISON), had ended up on the new "threshold lists" maintained by the New York Stock Exchange, NASDAQ,. American Stock Exchange and other exchanges in response to the requirements of Regulation SHO, and companies on the list may turn into super-volatile trading opportunities this week and in the weeks ahead.
The lists, at http://www.nyse.com/threshold,, http://www.nasdaqtrader.com/aspx/regsho.aspx,, http://amex.com/amextrader,, and elsewhere,reportedly show 73 securities on the NYSE list, only 9 of which are U.S. companies, 70 securities on the AMEX list, 22 individual companies, and 374 stocks on the NASDAQ list, including 96 on the exchange, 29 OTCBB and 254 on the Pink Sheets.
NASDAQ initially missed its Friday night deadline, and Dow Jones' (DJ) Wall Street Journal said the list is "far from complete as it stands." NASDAQ apparently has until noon today to complete the list.
Regulation SHO was advertised as a solution to what some have said could be the biggest scandal in the history of the securities industry, and regulators have drawn significant fire from both sides of the short selling camp, although "naked" short selling, where short sellers have almost unlimited abilities to sell securities many times over the number of shares outstanding, has long supposed to have been illegal.
The controversy has drawn both legislative and judicial proponents and opponents, and until the Tsunami took over the news, General Electric's (GE) "Dateline" was said to be on the verge of a major expose that will reportedly touch on possible collusion between brokerages that are purportedly impossibly behind in their fails to deliver certificates, the Depository Trust Corporation, whose "Stock Borrow Program" reportedly garners it almost a billion dollars a year in fees for what detractors call "counterfeit trades," and even the vaunted U.S. Securities and Exchange Commission itself, which makes a fee on every stock transaction, whether legitimate or not.
There is even a blog on the subject, at http://nakedshortingforum.blogspot.com/ .
A poster on the Yahoo (YHOO) message boards said that due to the new threshold rules, now being implemented, "the pressure is on the market makers to do what is right because all eyes will be placed on them. There will be many key Federal Authorities, economists, mathematicians, etc. that are already lined up to be performing certain studies for historical purposes. All the MMs have to do to not make matters worse is to do what is right and fix what they had broken for years with any fully reporting company that's a threshold security as soon as possible."
The poster noted that a stock must be fully reporting and considered a threshold security. A threshold security is one where .5% of its outstanding shares (OS) have been proven to have been naked shorted for 5 consecutive trading days and where the MMs have failed to close out those positions for five consecutive trading days.
"Example: If stock ABCD had 2,000,000 shares outstanding and was a fully reporting company as of 3 Jan 05, the MMs would need to fail to close out the open naked shorted position of .5% of 2,000,000 shares which would equate to 10,000 shares not being "completely" covered for 5 consecutive trading days. This means that the MMs would need to make sure they don't allow 5 consecutive days to happen where they leave any balance remaining of the 10,000 naked shorted shares as an open account of stock ABCD. They must 'completely' close all open accounts of naked shorted positions.
"When the supply of shares of a stock is zero, the supply is zero. It doesn't matter how you get there, be it by a naked short position or by the float being absorbed. This is where it all starts as a short squeeze will now be formed and grows as demand to purchase shares increase. This is where the misperception exists with Regulation Sho. People think that a new naked short position has to be created for a stock to be eligible for protection and rectification under Regulation Sho. This is not true. It's even better. All naked short positions of the past will not go away and must be dealt with. The clock begins ticking for covering, and means that any stock that has been naked shorted will automatically start out in a forced short squeeze mode that will only escalate the longer the MMs wait to cover.
"Any buying pressure will cause the increase of the naked shorted position to grow to begin approaching the 5 day consecutive window of not getting covered by the MMs. After the 5 days transpire where the MMs have failed to deliver and close the open naked shorted position, that stock in which they failed to deliver will be placed on a Threshold Security List for the public to view. This is where it starts to get awesome," said the post.
"With no buying pressure, they won't have to cover as soon as one might have hoped as shares are sold exceeding the amount of shares being bought for stock ABCD. Still, if they don't cover the 'entire' naked short position for 5 consecutive days, stock ABCD will show up on the Threshold Security List for the public to view on 10 January.
"After such, the MMs have 13 days to close out the 'entire' naked shorted position or face being suspended and/or shut down from that security and other penalties to possibly put that MM out of business. The end result will still be the supply being zero and the stock would be forced to be traded correctly based on supply and demand with an already dried up supply. This means the creation of an instant short squeeze!"
The poster said that the market makers will need to get the naked shorted shares out of circulation by increasing the bid to entice shareholders to sell. "The problem comes when they allow for the buying to outweigh the selling due to increased demand for the stock. As orders are placed to buy shares, they must be filled by the MMs. This will worsen their problem when nobody is selling. As the MMs make the mistake and allow for any stock to be placed on the Threshold Security List, it will publicly reveal where the MMs are already having a problem in covering. Us as shareholders will see this list and contribute with forcing the short squeezes for every stock on the list."
The recent Securities Industry of America symposium on Regulation SHO, which was supposed to curtail illegal naked short selling, only further deepened the U.S. Securities and Exchange Commission divide as a dramatic ' some say startling ' new 22-page working paper, "Strategic Delivery Failures in U.S. Equity Markets," was published.
Moderators at the symposium included Steven Kessler, Associate General Counsel for Goldman Sachs & Co. (GS), and Deborah Mittelman, Deputy Director of Global Compliance for Reuters' (RTRSY) Instinet. Panelists included Jeffrey Bernstein, Senior Managing Director of Bear Stearns (BSC), and Robert O'Connor, Executive Director of the Law Department for Morgan Stanley (MWD).
The referenced working paper by University of New Mexico Professor Leslie Boni was initiated while the author was visiting financial economist at the SEC.
She termed the "failures to deliver," which litigants have called "counterfeiting," as being "pervasive."
The professor said that a whopping 42% of listed stocks at the New York Stock Exchange, NASDAQ and AMEX, and 47% of unlisted stocks in the OTCBB and Pink Sheets had persistent fails of 5 days or more with 4% being above the SEC's threshold limits for failures.
The standard for settlement is presently 3 days with a concept proposal by the SEC in comment to reduce 3 day settlement to 1 day, noted Patch.
The economist pointed to a study conducted by Evans, Geczy, Musto, and Reed in 2003 that provided evidence that while the SRO's have buy-in requirements, such buy-ins almost never occur. She noted that an audit of one market maker showed that all or a portion of shares in 69,063 transactions during 1998-1999 were "fails to deliver."
"The market maker was bought-in on only 86 of these positions," she stated.
Dave Patch, editor of "Stockgate Today," said that his own review of the Securities Acts of 1933 and 1934 finds no reference to "strategic failures." In fact, he said, Section 17a of the 1934 act "mandates prompt and accurate clearance and settlement of trades, and the admission of Strategic Failures is also in direct violation of Rule 15c6-1."
Rule 15c6-1 defines the settlement cycle for trades executed and states that no Broker Dealer may enter into a contract for the sale of a security whereby the payment for that security and the delivery of that security is greater than 3 business days. For market making activities there is a slight exemption from the delivery in a Bona Fide Market Making activity but as the SEC and SRO's have repeatedly stated, Bona Fide Market making is not simply supporting the best offer in a naked short sale without also representing the best bid or near best bid in a long trade. They must be actively making a market on both sides of trading to use the exemption, noted Patch.
Delegates to the September 20 annual SEC Forum on Small Business passed several resolutions on the issue to be submitted to the SEC. Among them were:
1. Extend Reg. SHO to apply to all publicly traded companies including non-reporting companies.
2. Recommend that the SEC Commissioners reinstate the proposed provision in Regulation SHO that prohibited a selling shareholder from withdrawing his/her profits from the trade until after delivery of the underlying sold shares.
3. SEC should require all SROs, and any clearinghouse for an SRO that receives securities into accounts for security holders to disclose the fact of the ability to loan the securities in the accounts and allow security holders to opt out of allowing the securities to be loaned.
Robert Shapiro, chair of Sonecon LLC, an economic advisory firm and former Under Secretary of Commerce from 1998 to 2001 and principal economic advisor to President William Clinton in his 1992 campaign, has expressed "serious concerns about the impact of the final version of Regulation SHO regarding short sales on the equity and transparency of our equity markets."
Shapiro holds a Ph.D. from Harvard University and has been a Fellow of the National Bureau
of Economic Research, the Brookings Institution, and Harvard University.
Shapiro said the SEC is correct to broaden the terms of regulation of short sales, and applauded the section directing broker dealers to mark all equity orders as "long," "short" or "short exempt." More important, he said, the new "locate and delivery" requirements could substantially reduce stock manipulation carried out through naked short sales -- but only if those requirements are
widely applied and strictly enforced.
"Unfortunately, Regulation SHO does not meet either of these two standards. The troubling result is that the Regulation, in effect, establishes an official level of tolerance for unsettled or naked short sales," Shapiro charged.
Shapiro said he strongly concurs with the comments of the North American Securities Administrators Association (NASAA) on the draft rule, which said NASAA was "unable to determine why the Commission proposes to permit significant settlement failures at all. While there are instances when settlement may be legitimately delayed, existing regulations provide for extensions for settlement. If the Commission continues to allow settlement failures, it may well facilitate the harm that the proposal is designed to remedy."
"Until Regulation SHO, this economic counterfeiting has been facilitated by electronic record keeping and the apparent practice of the DTCC and its subsidiary National Securities Clearing Corporation (NSCC) of often disregarding persistent unsettled short positions. With Regulation SHO, the SEC has provided its implicit imprimatur for the same practice in cases covering the vast majority of public companies and billions of dollars."
Shapiro urged the SEC to "reconsider the provisions of Regulations SHO and, at a minimum, apply the 'locate and delivery' requirements for threshold securities to all short sale transactions, and adopt a zero-tolerance policy for significant settlement failures. American investors should feel confident that the SEC will ensure the integrity of every equity transaction they undertake and fully protect their right to receive what they have paid for."
Twenty civil cases have now been filed by O'Quinn, Laminack & Pirtle, Christian Smith & Jewell, and Heard, Robins, Cloud, Lubel & Greenwood, LLP, all of Houston, Texas. The consortium of law firms, famed for the giant awards they obtained suing tobacco companies. The group recently brought suit against the Depository Trust and Clearing Corp. for allegedly participating in the short-selling conspiracy through its "stock borrow" program which the attorneys say is nothing more than an illegal electronic printing press for stock certificates.
Lead counsel John O'Quinn said: "We are committed to the relentless pursuit of justice."
In comments to the U.S. Securities and Exchange Commission, C. Austin Burrell, who is providing litigation support and research for the law firms, said that StockGate is more massive than anyone may have imagined. "Illegal Naked Short Selling has stripped hundreds of billions, if not TRILLIONS, of dollars from American investors," and have resulted in over 7,000 public companies having been "shorted out of existence over the past six years." Burrell said some experts believe as much as $1 trillion to $3 trillion has been lost to this practice.
He stated that the restrictions on short selling were deliberately put into the Securities Acts of 1933 and 1934 because of the first-hand evidence then available that the "sheer scale of the crashes was a direct result of intentional manipulation of US markets through abusive short selling by a massive conspiracy."
Burrell noted that the 65-lawyer team presided over by lead lawyers Wes Christian and John O'Quinn has uncovered more than 1,200 hedge fund and offshore accounts working through more than 150 broker-dealers and market makers in a joint cooperative effort to strip small and medium size public companies of their value.
According to lawyer Christian, et.al., the DTC is at the very heart of the problem, and has almost a billion dollars a year at stake in keeping the problem.
The Depository Trust Company (DTC) is a member of the U.S. Federal Reserve System, a limited-purpose trust company under New York State banking law and a registered clearing agency with the SEC. The depository supposedly brings efficiency to the securities industry by retaining custody of some 2 million securities issues, effectively "dematerializing" most of them so that they exist only as electronic files rather than as countless pieces of paper. The depository also provides the services necessary for the maintenance of the securities it has in "custody."
According to the suit, the DTCC has an enormous pecuniary and conflicted interest in the entire short selling scandal through the huge income stream they were realizing from it every day. They have made literally billions of dollars lending individual real shares, in most cases over and over, getting a fee each time they made a journal entry in the "Stock Borrow Program."
The Stock Borrow Program was purportedly set up to facilitate expedited clearance of stock trades. Somewhere along the line, the DTCC became aware that if it could lend a single share an unlimited number of times, it could collect a fee each time, according to Burrell. "There are numerous cases of a single share being lent ten or many more times," giving rise to the complaint that the DTCC has been electronically counterfeiting just as was done via printed certificates before the Crash.
"Such re-hypothecation has in effect made the potential 'float' in a single company's shares virtually unlimited and the term 'float' meaningless. Shares could be electronically created/counterfeited/kited without a registration statement being filed, and without the underlying company having any knowledge such shares are being sold or even in existence." Burrell said the Christian/O'Quinn lawsuits will seek to show that the "counterfeiting/creation of unregistered shares is a specific violation of the Securities Act of 1933, barring the 'Sale of Unregistered Securities'."
One lawsuit alleges that the DTC has a colossal disincentive to stop the "stock borrow" program, booking revenues from services of $425,416,000 and similarly, the NSCC deriving revenues of $293,133,000.
Further, the suit alleges that "open positions" resulting from this activity at the close of business on December 31, 2003, "approximated $3,025,467,000" due to NSCC, and $2,303,717,000 due by NSCC, and unsettled positions of $721,750,000 for securities borrowed through the NSCC's "Stock Borrow Program." The largely unregulated DTC has become something of a defacto Czar presiding over the entire U.S. markets system, wielding more day-to-day influence and control than the SEC, the NASD and NASDAQ combined.
The Depository Trust and Clearing Corp.'s two preferred shareholders are the New York Stock Exchange and the NASD, a regulatory agency that also owns the NASDAQ (NDAQ) and the embattled American Stock Exchange!
In an era when corporate governance is the primary interest for the SEC and state regulators, the DTCC is hardly a role model. Its 21 directors represent a virtual litany of conflict:
They include Bradley Abelow, Managing Director, Goldman Sachs (GS); Jonathan E. Beyman, Chief Information Officer, Lehman Brothers (LEH); Frank J. Bisignano, Chief Administrative Officer and Senior Executive Vice President, Citigroup / Solomon Smith Barney's Corporate Investment Bank (C); Michael C. Bodson, Managing Director, Morgan Stanley (MWD); Gary Bullock, Global Head of Logistics, Infrastructure, UBS Investment Bank (UBS); Stephen P. Casper, Managing Director and Chief Operating Officer, Fischer Francis Trees & Watts, Inc.; Jill M. Considine,Chairman, President & Chief Executive Officer, The Depository Trust & Clearing Corporation (DTCC);
Also, Paul F. Costello, President, Business Services Group, Wachovia Securities (WB); John W. Cummings, Senior Vice President & Head of Global Technology & Services, Merrill Lynch & Co. (MER); Donald F. Donahue, Chief Operating Officer, The Depository Trust & Clearing Corporation (DTCC); Norman Eaker, General Partner, Edward Jones; George Hrabovsky, President, Alliance Global Investors Service; Catherine R. Kinney, President and Co-Chief Operating Officer, New York Stock Exchange; Thomas J. McCrossan, Executive Vice President, State Street Corporation (STT); Eileen K. Murray, Managing Director, Credit Suisse First Boston (CSR); James P. Palermo, Vice Chairman, Mellon Financial Corporation (MEL); Thomas J. Perna, Senior Executive Vice President, Financial Companies Services Sector of The Bank of New York (BNY); Ronald Purpora, Chief Executive Officer, Garban LLC; Douglas Shulman, President, Regulatory Services and Operations, NASD; and Thompson M. Swayne, Executive Vice President, JPMorgan Chase (JPM).
In their comments to the SEC regarding Regulation SHO in January, the 50 state regulators, through their association, the North American Association of Securities Administrators (NASAA) issued what many consider to be a strong warning that if the DTC is not dealt with in the final regulations, state regulators such as New York State Attorney General Eliot Spitzer may step to the plate.
In what many considered to have been explosive comments, Ralph Lambiase, NASAA president and Director of the Connecticut Division of Securities, warned "NASAA urges the Commission to reconsider its stance regarding the role of the Depository Trust and Clearing Corporation (the DTC). As a threshold matter, NASAA believes that the Commission should explicitly prohibit the DTC from lending more shares of a security than it actually holds. The ability of the overall proposed rule would be severely impared unless the Commission undertakes to implement such a prohibition."
The new "threshold lists" could make for an interesting January, and possibly, an interesting 2005.
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You're in for a surprise Janice.
The Green Baron Report has never altered its positive outlook since initiating coverage of CMKM Diamonds as a fully profiled stock back in August of 2004. Although the stock has vastly underperformed since our profile price of .0004, the company has paid out three stock dividends to shareholders since this profile in the way of restricted stock. We still believe the value of these stock dividends will surpass the price paid initially for CMKX stock.
Our patience has been tested with CMKM Diamonds, but we still remain more positive than ever. We are confident that CEO Urban Casavant and attorney Roger Glenn have worked out a plan that involves several different options to benefit shareholders. The Green Baron Report believes that paperwork to complete its filing has been completed, but must be approved by the auditor’s compliance department before it is submitted. A company spokesperson is now stating that new information is “close”. It is now up to CMKM Diamonds to prove us right, and make this “The Stock Play of a Lifetime”.
We normally do not comment on postings that occur on the message boards, but we must state that comments by KSBRADLEY on Raging Bull that we are predicting a major PR tonight are not accurate. Hopefully this doesn’t sound too cliché, but if it is not reported in our newsletter or directly from one of our partners, then it is not officially from us. None of our partners from Evergreen Marketing, Inc. or The Green Baron Report are permitted to post on the message boards.
CMKX in the News:
News Story
=Nasdaq, Other Exchanges Publish Threshold Sec. Lists
16:42 Saturday, January 08, 2005
By Carol S. Remond
A Dow Jones Newswires Column
NEW YORK (Dow Jones)-Major U.S. stock exchanges have now published their first so-called threshold lists as required by the Securities and Exchange Commission.
Under a new SEC regulation known as Reg SHO, stock exchanges have to make public daily lists of securities with large amounts of failure to deliver on settlement date. Reg SHO went into effect on Jan. 3.
The New York Stock Exchange and the American Stock Exchange made their first respective threshold lists available to the public as required by the SEC before midnight Friday. But Nasdaq, which has to keep track of a far larger number of securities, was about 10 hours late reporting its list.
The threshold lists were highly awaited by market participants because once a security gets on one, it will become harder and more expensive to sell short the stock, and that will likely translate into a higher trading price.
So far, lists provided by NYSE and AMEX appear to indicate that failures to deliver stock on settlement date is not a large problem for securities trading on the two exchanges. The NYSE list totals 73 securities, 9 of which represent the common stock of U.S. companies. The AMEX list is also relatively modest with 70 securities listed, 22 of which are the common shares of individual companies.
The list provided by Nasdaq is much larger, however. Nasdaq's threshold list was most anticipated by traders and investors since it covers mostly small-cap stocks - some of which are fairly illiquid and heavily shorted - that are most likely to have high levels of failures to deliver on settlement date.
So far, Nasdaq's list includes 379 stocks: 54 trading on Nasdaq's national market, 42 on its small-cap market, 29 on the Over-the-Counter Bulletin Board, and 254 companies trading on the unregulated Pink Sheets.
Nasdaq's list is far from complete as it stands.
Under Reg SHO, Nasdaq is supposed to report large failures to deliver for all companies trading on the Pink Sheets, which under SEC rules are"reporting companies."But a spokeswoman for the exchange said Friday that out of the 1,300 reporting Pink Sheets companies, Nasdaq would only be able to report on about 235 for which it had received current information on shares outstanding. (That number likely went up overnight, since 254 Pink Sheet companies were found over the threshold defined by Reg SHO as of Saturday morning).
The Nasdaq spokeswoman wasn't immediately available to say whether the Nasdaq list covers all 3,218 securities trading on the Over-the-Counter Bulletin Board. There are about 3,500 securities trading on Nasdaq's national and small-cap markets.
Non-reporting Pink Sheet companies are not covered by Reg SHO. NASD is currently working on a SHO-like rule that would cover non-reporting Pink Sheet companies.
Nasdaq could face severe difficulties meeting its obligation to report on all reporting Pink Sheet companies, given the complete lack of information and transparency on that trading venue. For example, CMKM Diamonds Inc. (CMKX), a Pink Sheet company with an estimated 800 billion shares outstanding, is a reporting company under SEC rules. The company has refused to tell even its shareholders how many shares are outstanding and has told its transfer agent not to share that information. As it stands, it will be impossible for Nasdaq to calculate whether CMKM meets the threshold as defined by Reg SHO.
In a short sale, a security not owned by the seller is sold in anticipation of a decrease in the stock price. Under existing NASD and NYSE rules, firms generally have to locate securities before accepting a short sale, a process known as affirmative determination. Brokerage firms also have to borrow a security or be able to provide it for delivery on demand on settlement date, three days after the transaction. If a firm cannot deliver the securities by settlement, a failed trade is entered into the Continuous Net Settlement, or CNS, a system administered by the National Securities Clearing Corp., or NSCC.
Reg SHO, among other things, aims to have these failed trades settled, mostly by clearly identifying securities with a high threshold of failed deliveries. Under Reg SHO, threshold securities are defined by two criteria: There are at least 10,000 shares in aggregate failed deliveries for the security for five consecutive settlement days, and these fails constitute 0.5% or more of outstanding shares.
Under Reg SHO, brokers who fail to deliver a security for 13 consecutive settlement days will have to execute mandatory buy-in to clean the fails. If the broker cannot buy-in the security, it and its clients will be restricted from further selling short the security without a"pre-borrow agreement."(Carol S. Remond is an award-winning columnist and one of four who write the"In The Money"feature. Most recently, she shared a 2003 Best of Business Award from the Society of Business Editors and Writers for her role in Dow Jones' team coverage of the Canary Capital mutual fund trading scandal.)
-By Carol S. Remond; Dow Jones Newswires; 201-938-2074; carol.remond@dowjones.com
(END) Dow Jones Newswires
I'm told when you get that old ...
... you have to take one of those little blue pills to stop you rolling out of bed.
Article on Shore Gold ...
http://www.resourceinvestor.com/pebble.asp?relid=7679
From the CMKX Community Forum
stav64's CONVERSATION WITH ANDY
Posted: Tue Jan 04, 2005 4:05 pm
stav64
Diamond in the Rough
Joined: 24 Jul 2004
Posts: 26
Okay....Here's my take. I just spoke to Andrew. I now understand a few more rules of the game. This is not going to be an overnight process as far as filing goes and it will happen when other entities involved in the process complete their portions of the paperwork. This is not a trigger pull by UC. So we are not waiting for him to just say go. Once these audits all come together then the filing will be done and we will be on our way. Whether it is up or down will be determined at that time and at that time only. I will also say that Andrew was very informative and explained the process to me where I as a regular layman could understand it. So these great theories by some of the posters as I see it are pretty much discounted. If Andy's comments to me reflect anything it is that UC and RG are building a strong business plan and are not going to throw an unprotected company out there to be shredded or driven out of business. Good Luck and remember that this is a risk. The market will determine the outcome of this once we become a reporting company.
http://www.cmkx.net/forum/viewtopic.php?p=41496&highlight=#41496
Posted: Tue Jan 04, 2005 4:39 pm
Denmage
Site Admin
Joined: 22 May 2004
Posts: 974
Location: Attleboro, MA
singerjmb wrote:
stav64 wrote:
it will happen when other entities involved in the process complete their portions of the paperwork.
Please explain further.
I think what he is referring to is that fact that we are now intertwined with USCA, GEMM, SGGM, Nevada Minerals, and CIM. We need their financial statements and valuations in order to complete our own. They will need to perform audits and provide accounting to CMKX before our statements can be called complete.
Denmage
http://www.cmkx.net/forum/viewtopic.php?p=41496&highlight=#41496
Posted: Tue Jan 04, 2005 7:39 pm
stav64
Diamond in the Rough
Joined: 24 Jul 2004
Posts: 26
According to Andy we have not filed anything yet.
The other entities I suggested are the auditing people involved. ie, The accountants and RG's office. You guys read way too far into what is said. Also when I asked in regards to why things aren't PR'ed I received a simple answer, something to the effect of " not only does our shareholders know but then the enemies will know". Makes sense to me.
To Realest......nope!
To Siggy.....No that's not what I was saying....Just as I stated. When the other entities audit are completed (ie: The accountants and RG's office)
Also I did ask as to the 75B shares that were retired (yes retired) to the treasury. I respectfully apologize to the person that had posted it and I questioned the use of the term retired back when it happened.
I received an edumacation!
http://www.cmkx.net/forum/viewtopic.php?p=41496&highlight=#41496
Has this been read yet??
The Year of the Investor
by Mark Faulk
Will 2005 be the year of the small investor? For years (maybe forever) Wall Street has been controlled by "big money", those who control the pursestrings, and therefore, wield the power over the stock market. For the most part, the small investor has been left to gather crumbs, and many watched helplessly as their hard-earned investments and retirement funds took a beating, partially because of the "stock market bubble" of the late 90s, but also because of rampant corruption that has been allowed to flourish in the stock market itself.
Then, the tide began to turn in 2004, as small investors, fed up with naked short selling, corruption in many of the companies themselves, and a system seemingly rigged in favor of the elite few, finally banded together and demanded to be heard. The Faulking Truth took up the fight in March of last year, joining a handful of other voices who had been calling for reform in the stock market for years. It was a call to arms that was finally heard. When investors joined in the battle, we were able to collectively make measurable progress over the past year. We all worked together to expose the "Canadian Connection" to the naked short selling scandal, and when the scams moved to Berlin, we exposed that as well. As a result, hundreds of companies who were listed without their permission on the Berlin Bremen Stock Exchange succeeded in having their shares delisted from that exchange. We have continued to keep pressure on Dateline to air an expose' on the naked short selling scandal, and that expose' will (finally) air sometime in the next few weeks. (We are currently awaiting confirmation of an air date from Dateline officials.) And our efforts to reach Congress have not been ignored, either. Our voices are being heard by those on Capitol Hill, and I am confident that we will see results from those continuing efforts in the very near future.
However, as with all worthwhile causes, our efforts have not been without opposition. Several online websites have recently sprung up with the specific purpose of discrediting those of us who would carry the torch for the American investor, and bashers continue to wreak havoc on stock message boards on the internet. The bashers have become more vocal, and more desperate in their attempts to discredit those of us who would speak out against corruption, claiming that those companies that have been abused by naked short sellers and those who invest in them somehow deserve to be driven into bankruptcy. All I can say to those who side with the very ones who threaten to destroy our stock markets is, "bring 'em on".
Let me clarify this one more time: Abuse exists on both sides of the issue, corruption exists both with some of the OTC companies, and even companies on the major exchanges (do the names Worldcom and Enron ring a bell?), who use the naked short selling scandal to perpetuate their own scams against shareholders, AND with the naked short sellers and those who profit from their activities, including lenders, brokers, and the NASD and SEC themselves. The only way to expose ALL those who would abuse our system is by a full Congressional investigation. One basher, who says that he works for a hedge fund in Florida, had this to say about naked short selling, "Yes, it happens. But it happens in a venue that is beyond the reach of DTC or the SEC. So you've got your "YES". Now, what about it? Let's suppose, for the sake of a truly absurd argument, that there are a billion shares that have been "naked shorted" through DTC in Datascension. So what?"
So what? Let me make this point once more, and then I'm moving on: If the bashers are so certain that they are right, and that the corruption exists within the companies themselves and not with the naked short sellers, then they should be screaming for an investigation themselves, even louder than we are. It is only when the fraud is exposed, wherever that fraud exists, that investors will regain some degree of trust in our stock market system. And if that trust is not re-established, the market itself will eventually collapse under the weight of it's own corrupt system. In fact, there is only one reason that bashers would want the corruption (no matter where that corruption originates) to continue unabated: they are profiting from the current system, they are a part of the corrupt system themselves.
There has been much speculation as to the SEC's motivation behind the SHO Regulations, ranging from posts on message boards that say the "the SEC has been on our side all along" to accusations that the regulations will do little to improve the current problems that have plagued the securities market for years. It is the opinion of The Faulking Truth that any actions currently being taken by the SEC are a result of pressure from all of us who have carried the fight to the SEC and other regulatory bodies, including Congress. The small investor has finally become the squeaky wheel.
The SEC has finally implemented Regulation SHO, aimed at putting a stop to the abusive and illegal practice of naked short selling. On the evening of January 7, 2005, the first "Securities Threshold List" will be posted, after which a list of securities with excessive open naked short positions will be published each day. (NYSE "Securities Threshold List": www.nyse.com/threshold ) (NASDAQ, AMEX, and OTCBB "Securities Threshold List": http://www.nasdaqtrader.com/aspx/regsho.aspx )
According to the OTC Journal, "Under Regulation SHO, threshold securities are defined by two criteria: 1) there are at least 10,000 shares in aggregate failed deliveries for the security for five consecutive settlement days and, 2) these fails to deliver constitute 0.5% or more of outstanding shares.
If the failed deliveries for the stocks on the Threshold List are not rectified within 13 trading days, the market maker to whom the shares was sold will effect a "buy in" in the open market.
The Threshold List could become a favorite resource for locating trading ideas on the long side. It might become the sport of hedge fund managers. These new regulations are emerging out of down side excesses from the the 2000 to 2003 time frame. The pendulum is finally swinging back to a level playing field. These actions by the regulators will help the OTC Bulletin Board become the incubator it is intended to be."
Will the recent actions of the SEC truly put an end to the abusive and illegal practice of naked short selling? Let's hope so, because proposed regulations submitted by the NASD aimed at curbing naked short selling were scrapped after Regulation SHO was enacted by the SEC. Oddly, the NASD denied to the very end that they were planning to scrap their proposal (Rule 3370), even though that information was leaked to the public through a "slip of the tongue" by SEC official Peter Chepucavage, which was detailed by the Faulking Truth in "He Said, She Said: SEC, NASD at Odds over Status of Proposal". Even though I was told by the NASD that it was not being rescinded (since it would be illegal to take any action without notifying the public), Rule 3370 was officially repealed on November 30, 2004, almost four months after that very same information was leaked to "insiders". As always, the public (that would be you and I) was the last to know. So now, our fate rests squarely in the hands of the SEC, who has had a history of putting the interests of those in power (in this case, as is usually the case, money=power) above the interests of the small investor that they are pledged to protect.
And with the implementation of Regulation SHO, we were yet again the last to know. According to Dave Patch, "The present list of companies that fall under this category is greater than 1000 and represent over 12% of all securities. Soon we will know exactly who is on this list although the regulators have already provided this confidential information to WALL STREET." The Faulking Truth began receiving phone calls and emails before the first of the year making those same claims. Once again, those in power, and those who stand to profit the most from this inside information, appear to have been tipped off in advance. Once again, we are the last to know.
I agree with several of my colleagues that the Threshold Securities List might offer some interesting investment opportunities. It might be well worth using the daily "Threshold Securities List" as yet another tool in your investing strategy. However, this does not in any way right the massive wrongs that have been committed against the American investors for years. In fact, many of the very hedge funds that profited on the down side during the naked short selling scandal will most likely reap rewards once again on the upside. Those small investors who have lost everything in the stock market will be left holding the bag. In the end, this is not a "get rich quick scheme" aimed at making back the massive losses that so many have suffered, it is a fight to make the markets fair once again, and to insure to our generation, and to generations to come, that they will have the opportunity to share in the American Dream, and to invest their hard-earned money in the stock market with the knowledge that it's not a "rigged game".
I sincerely hope that the new measures enacted by the SEC help alleviate the problems that have plagued investors for years, but their recent history suggests that they will once again sell out to the big money. Plus, all indications suggest that they intend to sweep all past corruption under the carpet yet again, and to allow those who robbed America's investors to take the money and run. That is, unless those same voices who helped to turn the tide in 2004 continue to speak out, and convince the major media, Congress, and state and federal authorities to join us. It is up to us to take back our stock markets, to finish the job that we started in 2005.
Sports Wheels Approves Amendments to Articles of Incorporation
2005-01-05 10:21 ET - News Release
LAS VEGAS, Jan. 5, 2005 (PRIMEZONE) -- Sports Wheels Inc. (Pink Sheets:SSWH), a leading provider of decorative car wheels, today announced that the company has filed the necessary documents with the state of Nevada to effect several amendments to the company's Articles of Incorporation. The amendments include a change in the company's name to Automotive Specialty Concepts, Inc. The company is now in the process of applying for a new CUSIP number and ticket symbol, which will be announced at a later date.
Other amendments include an authorization for the Board of Directors to adopt any re-capitalization of all the outstanding shares of common stock without the consent of stockholders, to approve the action by a majority written consent of shareholders in lieu of a meeting and to effect a 1 for 100 reverse split of the company's common stock while keeping the amount of common shares authorized at 1.4 billion.
Sports Wheels President Paul Stringer commented, "These amendments are designed to properly position the company to take advantage of market conditions and a number of favorable opportunities presented to it. Our focus will continue to be on the growth of the company and bringing value to its shareholders."
About the Company
Sports Wheels Inc. (http://www.esportswheels.com) is a leading provider of decorative wheels, sports memorabilia and other collectable artwork for the automobile industry and car owners.
Any statements contained herein related to future events are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on forward-looking statements. BDC Capital, Inc. undertakes no obligation to update any such statements to reflect actual events.
CONTACT:
Gemini Financial Communication
A. Beyer
951-587-8072