Bayport International Holdings Inc. (BAYP)

[Mephistopheles]

The following is my opinion and my opinion only and should not be taken as anything other than my opinion. I am long winded so get a cup of coffee and a sandwich before you start. No animals were harmed in the formation of the following post.

I would like see this stock get to .0001, while not popular among most investors there is a reason.

My theory is these Market Makers can cover their losses on this and yogi and booboo(bears)can move off this board with their negative rhetorical bashing tactics and on to any number of others that they try to drive down.

Although certain anonymous posters claim to have no affiliation/ reason to be here other than to make sure that potential investors are informed, evidence shows that for a year they have been diligently posting on this board with their negative banter up to ten times per day.

The action itself: Posting here multiple times for times per for over a year.
While I am no expert in human behavioral psychology I do that that most people perform actions for a reason. No one decides on whim to start running coast to coast besides Forest Gump, and even he had circumstances that lead to his journey beginning. (Sh*t Happens, and Have A Nice Day)

No one sits in front of their computer reading and posting for a year posting diligently ever day try to drive down the price of a stock by calling partners and officers names, studying tax records, making site visits, running background checks, and running at the mouth (keyboard) doing everything that their dynamic duel tag can possible muster in their mutual admiration society (Star Trek reference).

In my opinion this stock has more chance to succeed than almost any other because of the people who are involved with the corporation.

The point of my post today is identifying the trends not only in the stock, but also on this board. (Bears and the Bulls)

The bears and the bulls have fought many rounds as the the two symbolic beasts of finance, and I am sure that everyone is familiar with it, but for those who are not I am going to site a little information.
Wikipedia: Bear and the Bull (http://en.wikipedia.org/wiki/Market_trend)

A market trend is a putative prevailing course or tendency of a financial market to move in a particular direction over time.[1] These trends are classified as secular trends (long term), primary trends (mid-term) and secondary trends (short-term).[2] The concept of a market trend is used in technical analysis and is inconsistent with the efficient-market hypothesis.[3][4]
Technical analysis utilizes the concept that market trends or market cycles occur with a certain degree of regularity and predictability and consideration of market trends is common to many investors.[5] The terms bull market and bear market describe upward and downward market trends respectively and can be used to describe either the market as a whole or specific sectors and securities (stocks).[6]

Secular market trends
A secular market trend is a long-term trend that lasts 5 to 25 years and consists of a series of sequential primary trends.
In a secular bull market the prevailing trend is bullish or upward moving. The United States was described as being in a secular bull market from about 1983 to 2000 (or 2007), with brief upsets including the crash of 1987 and the dot-com bust of 2000–2002.

In a secular bear market, the prevailing trend is bearish or downward moving. An example of a secular bear market was seen in gold during the period between January 1980 to June 1999, culminating with the Brown Bottom. During this period the nominal gold price fell from a high of $850/oz ($30/g) to a low of $253/oz ($9/g),[7] and became part of the Great Commodities Depression.

Primary market trends
A primary trend has broad support throughout the entire market or market sector and lasts for a year or more.
Bull market
A bull market is associated with increasing investor confidence, and increased investing in anticipation of future price increases capital gains. A bullish market trend in the stock market often begins before the general economy shows clear signs of recovery.

Examples
India's Bombay Stock Exchange Index, SENSEX, was in a bull market trend for almost five years from April 2003 to January 2008 as it increased from 2,900 points to 21,000 points. Another notable and recent bull market was in the 1990s when the U.S. and many other global financial markets rose due to the dot-com bubble.

Bear market
A bear market is a general decline in the stock market over a period of time.[8] It is a transition from high investor optimism to widespread investor fear and pessimism.
According to The Vanguard Group, "While there’s no agreed-upon definition of a bear market, one generally accepted measure is a price decline of 20% or more over at least a two-month period."[9]
Examples

A bear market followed the Wall Street Crash of 1929 and erased 89% (from 386 to 40) of market capitalization by July 1932, marking the start of the Great Depression. After regaining nearly 50% of its losses, a longer bear market from 1937 to 1942 occurred in which the market was again cut in half. Another long-term bear market occurred from about 1973 to 1982, encompassing the stagflation of U.S. economy, the 1970s energy crisis, and the high unemployment of the early 1980s. Yet another bear market occurred between March 2000 and October 2002. The most recent example occurred between October 2007 and March 2009.

Market top
A market top is usually not a dramatic event. The market has simply reached the highest point that it will, for a few years, although of course people don't know that at the time. A decline then follows, usually gradually at first and later with more rapidity.
Examples
The peak of the dot-com bubble (as measured by the NASDAQ-100) occurred on March 24, 2000. The index closed at 4,704.73 and has not since returned to that level.

A recent peak for the broad U.S. market was October 9, 2007. The S&P 500 index closed at 1,565.15 and it is currently (Novemeber 2009) about 30% down from there.
Market bottom

A market bottom is a trend reversal, the end of a market downturn, and precedes the beginning of an upward moving trend (bull market).
It is very difficult to identify a bottom (referred to by investors as "bottom picking") while it is occurring. The upturn following a decline is often short-lived and prices might resume their decline. This would bring a loss for the investor who purchased stock(s) during a misperceived or "false" market bottom.

Baron Rothschild is said to have advised that the best time to buy is when there is "blood in the streets", i.e., when the markets have fallen drastically and investor sentiment is extremely negative.[10]

Examples
Some examples of market bottoms, in terms of the closing values of the Dow Jones Industrial Average (DJIA) include:
• The Dow Jones Industrial Average hit a bottom at 1738.74 on 19 October 1987, as a result of the decline from 2722.41 on 25 August 1987. This day was called Black Monday. (Chart[11]).
• A bottom of 7286.27 was reached on the DJIA on 9 October 2002 as a result of the decline from 11722.98 on 14 January 2000. This included an intermediate bottom of 8235.81 on 21 September 2001 which led to an intermediate top of 10635.25 on 19 March 2002 (Chart[12]). The "tech-heavy" Nasdaq fell a more precipitous 79% from its 5132 peak (10 March 2000) to its 1108 bottom (10 October 2002).
• A decline associated with the Subprime mortgage crisis starting at 14164.41 on 9 October 2007 (DJIA) and caused a short term bottom of 11740.15 on 10 March 2008. After a rallying to a temporary top on 2 May 2008 at 13058.20 the primary trend of the declining, "bear" market, resumed. (Chart[13]).

Secondary market trends
Secondary trends are short-term changes in price direction within a primary trend. The duration is a few weeks or a few months.

One type of secondary market trend is called a market correction. A correction is a short term price decline of 5% to 20% or so.[14]

Another type of secondary trend is called a bear market rally which consist of an market price increase of 10% to 20%. Bear market rallies occurred in the Dow Jones index after the 1929 stock market crash leading down to the market bottom in 1932, and throughout the late 1960s and early 1970s. The Japanese Nikkei stock average has been typified by a number of bear market rallies since the late 1980s while experiencing an overall long-term downward trend.

Investor sentiment
Investor sentiment is a contrarian stock market indicator.
By definition, the market balances buyers and sellers, so that there is a balance between positive and negative sentiment. Thus it is impossible for a high proportion of market participants to have negative sentiment. However it is possible to argue that when a high proportion of financial commentators and advisors express a bearish (negative) sentiment, some people consider this as a strong signal that a market bottom may be near. The predictive capability of such a signal (see also market sentiment) is thought to be highest when investor sentiment reaches extreme values.[15] Indicators that measure investor sentiment may include[citation needed]:
•
o Investor Intelligence Sentiment Index: If the Bull-Bear spread (% of Bulls - % of Bears) is close to a historic low, it may signal a bottom.
o American Association of Individual Investors (AAII) sentiment indicator: Many feel that the majority of the decline has already occurred once this indicator gives a reading of minus 15% or below.
o Other sentiment indicators include the Nova-Ursa ratio, and Short Interest/Total Market Float

Market capitulation
Market capitulation refers to the threshold reached after a severe fall in the market, when large numbers of investors can no longer tolerate the financial losses incurred.[16] These investors then capitulate (give up) and sell in panic, or find that their pre-set sell stops have been triggered, thereby automatically liquidating their holdings in a given stock. This may trigger a further decline in the stock's price, if not already anticipated by the market. Margin calls and mutual fund and hedge fund redemptions significantly contribute to capitulations.[citation needed]

The contrarians consider a capitulation a sign of a possible bottom in prices. This is because almost everyone who wanted (or was forced) to sell stock has already done so, leaving the buyers in the market, and they are expected to drive the prices up.

The peak in volume may precede an actual bottom.

Etymology
The precise origin of the phrases "bull market" and "bear market" are obscure. The Oxford English Dictionary cites an 1891 use of the term "bull market". In French "bulle spéculative" refers to a speculative market bubble. The Online Etymology Dictionary relates the word "bull" to "inflate, swell", and dates its stock market connotation to 1714.[17]
One hypothetical etymology points to London bearskin "jobbers" (market makers),[citation needed] who would sell bearskins before the bears had actually been caught in contradiction of the proverb ne vendez pas la peau de l'ours avant de l’avoir tué ("don't sell the bearskin before you've killed the bear")—an admonition against over-optimism.[citation needed] By the time of the South Sea Bubble of 1721, the bear was also associated with short selling; jobbers would sell bearskins they did not own in anticipation of falling prices, which would enable them to buy them later for an additional profit.
Another plausible origin is from the word "bulla" which means bill, or contract. When a market is rising, holders of contracts for future delivery of a commodity see the value of their contract increase. However in a falling market, the counterparties—the "bearers" of the commodity to be delivered—win because they have locked in a future delivery price that is higher than the current price.[citation needed]
Some analogies that have been used as mnemonic devices:
• Bull is short for 'bully', in its now mostly obsolete meaning of 'excellent'.
• It relates to the common use of these animals in blood sport, i.e bear-baiting and bull-baiting.
• It refers to the way that the animals attack: a bull attacks upwards with its horns, while a bear swipes downwards with its paws.
• It relates to the speed of the animals: bulls usually charge at very high speed whereas bears normally are thought of as lazy and cautious movers—a misconception because a bear, under the right conditions, can outrun a horse.[18]
• They were originally used in reference to two old merchant banking families, the Barings and the Bulstrodes.
• Bears hibernate, while bulls do not.[citation needed]
• The word "bull" plays off the market's returns being "full" whereas "bear" alludes to the market's returns being "bare".

In describing financial market behavior, the largest group of market participants is often referred to, metaphorically, as a herd. This is especially relevant to participants in bull markets since bulls are herding animals. A bull market is also sometimes described as a bull run. Dow Theory attempts to describe the character of these market movements.[19]
International sculpture team Mark and Diane Weisbeck were chosen to re-design Wall Street's Bull Market. Their winning sculpture, the "Bull Market Rocket" was chosen as the modern, 21st century symbol of the up-trending Bull Market.


What we have here on this board is a very simple version of the bulls and the bears.
Bulls: Some of us are Bulls and would like to see this stock grow and prosper into a water park, imax theater, concert hall, and casino.

Bears: Others would like to see it never happen and the stock nose dive to .0001 and be delisted, or at least go low enough that they themselves can buy the float, or cover a loss, or maybe take over the company. Who knows whatever the reason is. What most people did not know is that there is money to be made when the stock goes down as well.

There has been rumor and speculation that Naked Shorting has occurred in this stock, I also believe this to be true. However I see no clear evidence of the act here. Although it is a very common practice in the market. After a year you think this would be given up on. But then again no one likes to loose money.

Naked short selling, or naked shorting, is the practice of selling a financial instrument short without first borrowing the security or ensuring that the security can be borrowed as is done in a conventional short sale. When the seller does not obtain the shares within the required time frame, the result is known as a "fail to deliver". The transaction generally remains open until the shares are acquired by the seller or the seller's broker, allowing the trade to be settled.[1] Naked short selling can be used to manipulate the price of securities by driving their price down, and its use in this way is illegal.[2] However, the practice is considered benign under certain circumstances, such as trading by market makers.[3]

In the United States, naked short selling is covered by various SEC regulations which prohibit the practice.[4] In 2005, "Regulation SHO" was enacted, requiring that broker-dealers have grounds to believe that shares will be available for a given stock transaction, and requiring that delivery take place within a limited time period.[3][5] As part of its response to the crisis in the North American markets in 2008, the SEC issued a temporary order restricting short-selling in the shares of 19 financial firms deemed systemically important, by reinforcing the penalties for failing to deliver the shares in time.[6] Effective September 18, 2008, amid claims that aggressive short selling had played a role in the failure of financial giant Lehman Brothers, the SEC extended and expanded the rules to remove exceptions and to cover all companies.[7][8]
Some commentators have contended that despite regulations, naked shorting is widespread and that the SEC regulations are poorly enforced. Its critics have contended that the practice is susceptible to abuse, can be damaging to targeted companies struggling to raise capital, and has led to numerous bankruptcies.[4][7][9] However, other commentators have said that the naked shorting issue is a "devil theory",[10] not a bona fide market issue and a waste of regulatory resources.[11]

Normal shorting
Main article: Short (finance)
Short selling is a form of speculation that allows a trader to take a "negative position" in a company. Conventionally, the trader will "borrow" securities from a current shareholder, typically a bank or prime broker, agreeing to return them on demand. The seller delivers these shares to a buyer, who takes full ownership and likely does not know that he is participating in a short sale. When the seller wants to "unwind" the position, he buys back equivalent shares in the market and returns them to the lender.

This short/borrow system provides the trader with shares to sell at current prices, in the hope that he will profit by repurchasing them later when the price has lowered. Because the seller/borrower is generally required to make a deposit for the full share price with the lender, it also provides the lender with interest on a position that he was not actively trading.

Naked shorts in the United States
Naked short selling is a case of short selling without first arranging a borrow. If the stock is in short supply, finding shares to borrow can be difficult. The seller may also decide not to borrow the shares, in some cases because lenders are not available, or because of the costs of lending. When shares are not borrowed within the clearing time period and the short-seller does not tender shares to the buyer, the trade is considered to have "failed to deliver."[12] Nevertheless, the trade will continue to sit open or the buyer may be credited the shares by the DTCC until either the short-seller closes out the position or borrows the shares.

It is difficult to measure how often naked short selling occurs. Fails to deliver are not necessarily indicative of naked shorting, and can result from both "long" transactions (stock purchases) and short sales.[3][13] Naked shorting can be invisible in a liquid market, as long as the short sale is eventually delivered to the buyer. However, if the covers are impossible to find, the trades fail. Fail reports are published regularly by the SEC[14], and a sudden rise in the number of fails-to-deliver will alert the SEC to the possibility of naked short selling. In some recent cases, it was claimed that the daily activity was larger than all of the available shares, which would normally be unlikely.[12]

Extent of naked shorting
The reasons for naked shorting, and the extent of it, have been disputed for several years before the SEC's 2008 action to prohibit the practice. What is generally recognized is that naked shorting tends to happen when shares are difficult to borrow. Studies have shown that naked short selling also increases in correlation with the cost of borrowing.
In recent years, a number of companies have been accused of using naked shorts in aggressive efforts to drive down share prices, sometimes with no intention of ever delivering the shares.[12][15] These claims focus on the fact that, at least in theory, the practice allows an unlimited number of shares to be sold short. A Los Angeles Times editorial in July 2008 said that naked short selling "enables speculators to drive down a company's stock by offering an overwhelming number of shares for sale."[16] The SEC, however, says that naked shorting is sometimes falsely asserted as a reason for a share price decline, when in fact "the price decrease is a result of the company's poor financial situation rather than the reasons provided by the insiders or promoters."[3]

Before 2008, regulators had generally downplayed the extent of naked shorting in the US. At a North American Securities Administrators Association (NASAA) conference on naked short selling in November 2005, an official of the New York Stock Exchange stated that NYSE had not found evidence of widespread naked short selling. In 2006, an official of the SEC said that "While there may be instances of abusive short selling, 99% of all trades in dollar value settle on time without incident."[17] Of all those that do not, 85% are resolved within 10 business days and 90% within 20.[17] That means that about 1% of shares that change hands daily, or about $1 billion per day, are subject to delivery failures,[2] although the SEC has stated that "fails-to-deliver can occur for a number of reasons on both long and short sales," and accordingly that they do not necessarily indicate naked short selling.[3][13]
In 2008, SEC chairman Christopher Cox said that the SEC "has zero tolerance for abusive naked short-selling" while implementing new regulations to prohibit the practice, culminating in the September 2008 action following the failures of Bear Sterns and Lehman Brothers amidst speculation that naked short selling had played a contributory role.[8][18] Cox said that "the rule would be designed to ensure transparency in short-selling in general, beyond the practice of naked short-selling."[8]

Claimed effects of naked shorting
As with the prevalence of naked shorting, the effects are contested. The SEC has stated that the practice can be beneficial in enhancing liquidity in difficult-to-borrow shares, while others have suggested that it adds efficiency to the securities lending market. Critics of the practice argue that it is often used for market manipulation, that it can damage companies and even that it threatens the broader markets.
One complaint about naked shorting from targeted companies is that the practice dilutes a company's shares for as long as unsettled short sales sit open on the books. This has been alleged to create "phantom" or "counterfeit" shares, sometimes going from trade to trade without connection to any physical shares, and artificially depressing the share price.[15] However, the SEC has disclaimed the existence of counterfeit shares and stated that naked short selling would not increase a company's outstanding shares.[5] Short seller David Rocker contended that failure to deliver securities "can be done for manipulative purposes to create the impression that the stock is a tight borrow," although he said that this should be seen as a failure to deliver "longs" rather than "shorts."[19]
Robert J. Shapiro, former undersecretary of commerce for economic affairs, and a consultant to a law firm suing over naked shorting,[20] has claimed that naked short selling has cost investors $100 billion and driven 1,000 companies into the ground.[9]

Richard Fuld, the former CEO of the financial firm Lehman Brothers, during hearings on the bankruptcy filing by Lehman Brothers and bailout of AIG before the House Committee on Oversight and Government Reform alleged that a host of factors including a crisis of confidence and naked short selling attacks followed by false rumors contributed to both the collapse of Bear Stearns and Lehman Brothers.[21] The Wall Street Journal's Dealbook blog said that Fuld was "obsessed" with short sellers, and that "when Fuld was questioned about the shorts’ connection to Goldman, he grumbled that he had no evidence but didn’t sound convinced." House committee Chairman Henry Waxman said the committee received thousands of pages of internal documents from Lehman and these documents portray a company in which there was “no accountability for failure".[22][23][24] In July 2008, U.S. Securities and Exchange Commission chairman Christopher Cox said there was no "unbridled naked short selling in financial issues."[25]

Securities Exchange Act of 1934
The Securities Exchange Act of 1934 stipulates a settlement period up to three business days before a stock needs to be delivered,[12] generally referred to as "T+3 delivery."
[edit] Regulation SHO

The SEC enacted Regulation SHO in January 2005 to target abusive naked short selling by reducing failure to deliver securities, and by limiting the time in which a broker can permit failures to deliver.[26] In addressing the first, it stated that a broker or dealer may not accept a short sale order without having first borrowed or identified the stock being sold.[27] The rule had the following exemptions:
1. Broker or dealer accepting a short sale order from another registered broker or dealer
2. Bona-fide market making
3. Broker-dealer effecting a sale on behalf of a customer that is deemed to own the security pursuant to Rule 200[28] through no fault of the customer or the broker-dealer.[27]
To reduce the duration for which fails to deliver are permitted to sit open, the regulation requires broker-dealers to close-out open fail-to-deliver positions in threshold securities that have persisted for 13 consecutive settlement days.[26] The SEC, in describing Regulation SHO, stated that failures to deliver shares that persist for an extended period of time "may result in large delivery obligations where stock settlement occurs."[26]

Regulation SHO also created the "Threshold Security List," which reported any stock where more than 0.5% of a company's total outstanding shares failed delivery for five consecutive days. A number of companies have appeared on the list, including Krispy Kreme, Martha Stewart Omnimedia and Delta Airlines. The Motley Fool, an investment website, observes that "when a stock appears on this list, it is like a red flag waving, stating 'something is wrong here!'"[12] However, the SEC clarified that appearance on the threshold list "does not necessarily mean that there has been abusive naked short selling or any impermissible trading in the stock."[26]
In July 2006, the SEC proposed to amend Regulation SHO, to further reduce failures to deliver securities.[29] SEC Chairman Christopher Cox referred to "the serious problem of abusive naked short sales, which can be used as a tool to drive down a company's stock price." and that the SEC is "concerned about the persistent failures to deliver in the market for some securities that may be due to loopholes in Regulation SHO.[30]
[edit] Developments, 2007 to the present
In March 2007, the Securities and Exchange Board of India (SEBI), which disallowed short sales altogether in 2001 as a result of the Ketan Parekh affair, reintroduced short selling under regulations similar to those developed in the United States. In conjunction with this rule change, SEBI outlawed all naked short selling.[31][32]

In June 2007, the SEC voted to remove the grandfather provision that allowed fails-to-deliver that existed before Reg SHO to be exempt from Reg SHO. SEC Chairman Christopher Cox called naked short selling "a fraud that the commission is bound to prevent and to punish." The SEC also said it was considering removing an exemption from the rule for options market makers.[33] Removal of the grandfather provision and naked shorting restrictions generally have been endorsed by the U.S. Chamber of Commerce.[34]

In March 2008, SEC Chairman Christopher Cox gave a speech entitled the "'Naked' Short Selling Anti-Fraud Rule," in which he announced new SEC efforts to combat naked short selling.[35] Under the proposal, the SEC would create an antifraud rule targeting those who knowingly deceive brokers about having located securities before engaging in short sales, and who fail to deliver the securities by the delivery date. Cox said the proposal would address concerns about short-selling abuses, particularly in the market for small-cap stocks. Even with the regulation in place, the SEC received hundreds of complaints in 2007 about alleged abuses involving short sales. The SEC estimated that about 1% of shares that changed hands daily, about $1 billion, were subject to delivery failures. SEC Commissioners Paul Atkins and Kathleen Casey expressed support for the crackdown.[36][37]

In mid-July 2008, the SEC announced emergency actions to limit the naked short selling of government sponsored enterprises (GSEs), such as Fannie Mae and Freddie Mac, in an effort to limit market volatility of financial stocks.[38] But even with respect to those stocks the SEC soon thereafter announced there would be an exception with regard to market makers.[39] SEC Chairman Cox noted that the emergency order was "not a response to unbridled naked short selling in financial issues", saying that "that has not occurred". Cox said, "rather it is intended as a preventative step to help restore market confidence at a time when it is sorely needed."[25] Analysts warned of the potential for the creation of price bubbles.[39][40]
The emergency actions rule expired August 12, 2008.[41][42][43][44] However, at September 17, 2008, the SEC issued new, more extensive rules against naked shorting, making "it crystal clear that the SEC has zero tolerance for abusive naked short selling". Among the new rules is that market makers are no longer given an exception. As a result, options market makers will be treated in the same way as all other market participants, and effectively will be banned from naked short selling.[45]

On November 4, 2008, voters in South Dakota considered a ballot initiative, "The South Dakota Small Investor Protection Act", to end naked short selling in that state. The Securities Industry and Financial Markets Association of Washington and New York said they would take legal action if the measure passed.[46] The voters defeated the initiative.[47]
In May 2009, the New York Times's chief financial correspondent Floyd Norris reported that naked shorting is "almost gone." He said that delivery failures, where they occur, are quickly corrected.[48]

In July 2009, the SEC, under what the Wall Street Journal described as "intense political pressure," made permanent an interim rule that obliges brokerages to promptly buy or borrow securities when executing a short sale.[49] The SEC said that since the fall of 2008, fails to deliver in all equity securities declined by about 57 percent, and the average daily number of threshold list securities declined from a high of about 582 securities in July 2008 to 63 in March 2009.[50]
[edit] Regulations outside of the United States
Several international exchanges have either partially or fully restricted the practice of naked short selling of shares. They include Australia's Australian Securities Exchange,[51] India's Securities and Exchange Board,[52] the Netherlands's Euronext Amsterdam,[53] Japan's Tokyo Stock Exchange,[54] and Switzerland's SWX Swiss Exchange.[55][56]
Japan's naked shorting ban started on November 4, 2008, and was originally scheduled to run until July 2009, but was extended through October of that year.[57][58] Japan's Finance Minister, Shōichi Nakagawa stated, "We decided (to move up the short-selling ban) as we thought it could be dangerous for the Tokyo stock market if we do not take action immediately." Nakagawa added that Japan's Financial Services Agency would be teaming with the Securities and Exchange Surveillance Commission and Tokyo Stock Exchange to investigate past violations of Japanese regulations on stock short-selling.[59]
The Singapore Exchange started to penalize naked short sales with an interim measure in September, 2008. These initial penalties started at $100 per day. In November, they announced plans to increase the fines for failing to complete trades. The new penalties would penalize traders who fail to cover their positions, starting at $1,000 per day. There would also be fines for brokerages who fail to use the exchange's buying-in market to cover their positions, starting at $5,000 per day. The Singapore exchange had stated that the failure to deliver shares inherent in naked short sales threatened market orderliness.[60]

Regulatory enforcement actions
In 2005, the SEC notified Refco of intent to file an enforcement action against the securities unit of Refco for securities trading violations concerning the shorting of Sedona stock. The SEC sought information related to two former Refco brokers who handled the account of a client, Amro International, which shorted Sedona's stock.[61] No charges had been filed by 2007.

In December 2006, the SEC sued Gryphon Partners, a hedge fund, for insider trading and naked short-selling involving PIPEs in the unregistered stock of 35 companies. PIPEs are "private investments in public equities," used by companies to raise cash. The naked shorting took place in Canada, where it was legal at the time. Gryphon denied the charges.[62]
In March 2007, Goldman Sachs was fined $2 million by the SEC for allowing customers to illegally sell shares short prior to secondary public offerings. Naked short-selling was allegedly used by the Goldman clients. The SEC charged Goldman with failing to ensure those clients had ownership of the shares. SEC Chairman Cox said "That is an important case and it reflects our interest in this area."[63]

In June 2007, executives of Universal Express, which had claimed naked shorting of its stock, were sanctioned by a federal court judge as "repeated and remorseless violators" of the securities laws. The SEC asserted that the company "appears to exist primarily as a vehicle for fraud."[64] Referring to a court ruling barring CEO Richard Altomare from serving as an officer of a public company, New York Times columnist Floyd Norris said: "In Altomare's view, the issues that bothered the judge are irrelevant. 'Long and short of it,' he said in a statement, 'this is a naked short hallmark case in the making.' Or it is proof that it can take a long time for the SEC to stop a fraud."[65] Universal Universal Express claimed that 6,000 small companies had been put out of business by naked shorting, which the company said "the SEC has ignored and condoned."[66] A receiver was subsequently appointed to administer the company.
In July 2007, Piper Jaffray was fined $150,000 by the New York Stock Exchange (NYSE). Piper violated securities trading rules from January through May 2005, selling shares without borrowing them, and also failing to "cover short sales in a timely manner", according to the NYSE.[67] At the time of this fine, the NYSE had levied over $1.9 million in fines for naked short sales over seven regulatory actions.[68]

Also in July 2007, the American Stock Exchange fined two options market makers for violations of Regulation SHO. SBA Trading was sanctioned for $5 million, and ALA Trading was fined $3 million, which included disgorgement of profits. Both firms and their principals were suspended from association with the exchange for five years. The exchange said the firms used an exemption to Reg. SHO for options market makers to "impermissibly engage in naked short selling."[69][70][71]
In October 2007, the SEC settled charges against New York hedge fund adviser Sandell Asset Management Corp. and three executives of the firm for, among other things, shorting stock without locating shares to borrow. Fines totalling $8 million were imposed, and the firm neither admitted nor denied the charges.[72]

In October 2008 Lehman Brothers Inc. was fined $250,000 by the Financial Industry Regulatory Authority (FINRA) for failing to properly document the ownership of short sales as they occurred, and for failing to annotate an affirmative declaration that shares would be available by the settlement date.[73]

Litigation and DTCC
The Depository Trust and Clearing Corporation (DTCC) has been criticized for its approach to naked short selling.[2][74] DTCC has been sued with regard to its alleged participation in naked short selling, and the issue of DTCC's possible involvement has been taken up by Senator Robert Bennett and discussed by the NASAA and in articles in the Wall Street Journal and Euromoney Magazine.

There is no dispute that illegal naked shorting happens,[2][75] what is in dispute is how much it happens, and to what extent is DTCC to blame.[2][76] Some companies with falling stocks blame DTCC as the keeper of the system where it happens, and say DTCC turns a blind eye to the problem.[2] Referring to trades that remain unsettled, DTCC's chief spokesman Stuart Goldstein said, "We're not saying there is no problem, but to suggest the sky is falling might be a bit overdone."[77][78] In July 2007, Senator Bennett suggested on the U.S. Senate floor that the allegations involving DTCC and naked short selling are "serious enough" that there should be a hearing on them with DTCC officials by the Senate Banking Committee, and that banking committee chairman Christopher Dodd has expressed a willingness to hold such a hearing.[79]

Critics also contend DTCC has been too secretive with information about where naked shorting is taking place.[2] Ten suits concerning naked short-selling filed against the DTCC were withdrawn or dismissed by May 2005.[80]
A suit by Electronic Trading Group, naming major Wall Street brokerages, was filed in April 2006 and dismissed in December 2007.[81][82]

Two separate lawsuits, filed in 2006 and 2007 by NovaStar Financial, Inc. shareholders and Overstock.com, named as defendants ten Wall Street prime brokers. They claimed a scheme to manipulate the companies' stock by allowing naked short selling.[83] A motion to dismiss the Overstock suit was denied in July 2007.[84][85]

A suit against DTCC by Pet Quarters Inc. was dismissed by a federal court in Arkansas, and upheld by the Eighth Circuit Court of Appeals in March 2009.[86] Pet Quarters alleged the Depository Trust & Clearing Corp.'s stock-borrow program resulted in the creation of nonexistent or phantom stock and contributed to the illegal short selling of the company's shares. The court ruled: "In short, all the damages that Pet Quarters claims to have suffered stem from activities performed or statements made by the defendants in conformity with the program's Commission approved rules. We conclude that the district court did not err in dismissing the complaint on the basis of preemption." Pet Quarters' complaint was almost identical to suits against DTCC brought by Whistler Investments Inc. and Nanopierce Technologies Inc. The suits also challenged DTCC's stock-borrow program, and were dismissed.[87]

Studies
A study of trading in initial public offerings by two SEC staff economists, published in April 2007, found that excessive numbers of fails to deliver were not correlated with naked short selling. The authors of the study said that while the findings in the paper specifically concern IPO trading, "The results presented in this paper also inform a public debate surrounding the role of short selling and fails to deliver in price formation."[88]

In contrast, a study by Leslie Boni in 2004 found correlation between "strategic delivery failures" and the cost of borrowing shares. The paper, which looked at a "unique dataset of the entire cross-section of U.S. equities," credited the initial recognition of strategic delivery fails to Richard Evans, Chris Geczy, David Musto and Adam Reed, and found its review to provide evidence consistent with their hypothesis that "market makers strategically fail to deliver shares when borrowing costs are high."

An April 2007 study conducted for Canadian market regulators by Market Regulation Services Inc. found that fails to deliver securities were not a significant problem on the Canadian market, that "less than 6% of fails resulting from the sale of a security involved short sales" and that "fails involving short sales are projected to account for only 0.07% of total short sales."[89][90]

A Government Accountability Office study, released in June 2009, found that recent SEC rules had apparently reduced abusive short selling, but that the SEC needed to give clearer guidance to the brokerage industry.[91]

Coverage in newspapers and magazines
While concern expressed by the regulator has been echoed by journalists, some commentators contend that naked short selling is not harmful and that its prevalence has been exaggerated by corporate officials seeking to blame external forces for their own shortcomings.[92] Others have discussed naked short selling as a confusing or bizarre form of trading.[15][93]
Reviewing the SEC's July 2008 emergency order, Barron's said in an editorial: "Rather than fixing any of the real problems with the agency and its mission, Cox and his fellow commissioners waved a newspaper and swatted the imaginary fly of naked short-selling. It made a big noise, but there's no dead bug."[11] Holman Jenkins of the Wall Street Journal said the order was "an exercise in symbolic confidence-building" and that naked shorting involved technical concerns except for subscribers to a "devil theory".[10] The Economist said the SEC had "picked the wrong target", mentioning a study by Arturo Bris of the Swiss International Institute for Management Development who found that trading in the 19 financial stocks became less efficient.[94] The Washington Post expressed approval of the SEC's decision to address a "frenetic shadow world of postponed promises, borrowed time, obscured paperwork and nail-biting price-watching, usually compressed into a few high-tension days swirling around the decline of a company."[95] The Los Angeles Times called the practice of naked short selling "hard to defend," and stated that it was past time the SEC became active in addressing market manipulation.[96]

The Wall Street Journal said in an editorial in July 2008 that "the Beltway is shooting the messenger by questioning the price-setting mechanisms for barrels of oil and shares of stock." But it said the emergency order to bar naked short selling "won't do much harm," and said "Critics might say it's a solution to a nonproblem, but the SEC doesn't claim to be solving a problem. The Commission's move is intended to prevent even the possibility that an unscrupulous short seller could drive down the shares of a financial firm with a flood of sell orders that aren't backed by an actual ability to deliver the shares to buyers."[97]

The Washington Post's Frank Ahrens described naked shorting as "far more dangerous than sexy" in a July, 2008 article. "It's a frenetic shadow world of postponed promises, borrowed time, obscured paperwork and nail-biting price-watching, usually compressed into a few high-tension days swirling around the decline of a company," Ahrens says.[98]
In an article published in October 2009, Rolling Stone writer Matt Taibbi contended that Bear Stearns and Lehman Brothers were flooded with "counterfeit stock" that helped kill both companies. Taibbi said that the two firms got a "push" into extinction from naked short-selling.[99] However, this was disputed in an article in The Big Money, a financial news website operated by Slate.com, citing, inter alia, a study by finance researchers at the University of Oklahoma Price College of Business, which found "no evidence that stock price declines were caused by naked short selling."[100].

So to conclude, does shorting exist, you bet it does. Did it happen here? In my opinion yes it has.

In the end only we will never know if there is a market maker or financial institution involved in trying to keep this stock down.

What we are left with is the Bulls and Bears.

I am proud to be a Bull and would like nothing more than to see this project move forward.

Other Famous Bulls:
Red Rock
Little Yellow Jacket
Michael Jordan
Scottie Pippen

Best of luck to you Summit City Grand Resort and Casino Holdings Corporation!

--Mephistopheles the Robber Baron--