Zeev's Ideas

[Koikaze]

REGULATION SHO - up to ZEEV:343026, 01/09/05

01/08: (342877) (*COMMENT*)

The Reg SHO list is out in case anyone cares:

http://www.nyse.com/Frameset.html?displayPage=/threshold/


(Excerpted from the NYSE link for the reader's convenience. flg.)


"Threshold Securities"

"On July 28, 2004 the Securities and Exchange Commission ("SEC") adopted Regulation SHO with a compliance date of January 3, 2005. Regulation SHO requires Self Regulatory Organizations ("SRO") to disseminate a daily list of 'threshold securities' where such SRO or its market center is the primary listing venue for any such security. Rule 203(c)(6) of Regulation SHO defines a threshold security as any equity security of an issuer that is registered under Section 12, or that is required to file reports pursuant Section 15(d) of the Exchange Act where, for five consecutive settlement days: (1) there are aggregate fails to deliver at a registered clearing agency of 10,000 shares or more per security; (2) the level of fails is equal to at least one-half of one percent of the issuer's total shares outstanding; and (3) the security is included on a list published by an SRO. Accordingly, the NYSE will post a list of threshold securities to this site for every settlement day, including any such day where DTCC is


(The following was copied from THE TRADER colume in the January 10, 2005 issue of Barron's. flg)


"Now, get ready to start hearing about the release of 'threshold lists.' Beginning Monday, the major stock exchanges will begin posting lists of stocks that have a certain number of shares which have "failed to deliver." This serves as a proxy for the shares sold short without the seller's broker having firmly arranged to borrow them. These so-called 'naked short sales' have been targetted by regulators. Exchanges must now publish stocks with many unconsummated trades, a rule meant to force brokers to clean up the practice.

The Securities and Exchange Commission rule, called Regulation SHO, requires that any stock with at least 10,000 shares and 0.5% of the stock's float categorized as failed to deliver will be on the threshold lists. Brokers will then be required to cancel or close out short sales in these names, presumably through forced buying of the stocks.

Heavily shorted small stocks likely will show up on this list, and many traders have decided to speculate on potential upside 'short squeezes' by buying them in anticipation. Early indications are that popular day-trader favorites and short targets such as TravelZoo, American Pharmaceutical Partners, Biosite, Pre-Paid Legal, Martha Stewart Living and Novastar Financial will be featured on the initial lists.

Let the games begin. But note that because of technical reasons, no genuine short squeezes are likely to occur for a couple of


(That's the end of the material I excerpted/copied. Please see #msg-5051271 for the author's report of the NYSE Threshold List. flg.)
(*END*)

It would be interesting if they listed also by how much the failure to deliver is (at least as percentage of outstanding stock). Have you used this list to select candidates for short squeeze?


01/09: (343022) (*COMMENT*)

(Part 1)
A pretty good rally is in progress near the close of trading in Tel Aviv, maybe a precursors of a slightly better week ahead, or just a reflection on the smoothness of the elections next door??

(Part 2)
More likely a response to certain Israeli companys naked short positions being addressed....Real problems exist with naked shorts on these companies. Of couse this is limited to those companies with dual listings in our markets.
(*END*)

You think that new regulation will impact shorting? longer term, it may alleviate some of the fast short covering in such stocks....though, it may also reduce the severity of the short attacks on others.


01/09: (343026) (*COMMENT*)
will it cause a short cover run on those that make the list?
(*END*)

I have no idea, usually, I don't like playing against the shorts, most of the time, these guys know what they are doing. Professional shorts are more dedicated to their analysis then long, IMTO.