SHO...Copied from another board...Looks like they are covering their 'rses now for an incomplete list that said nothing about an incomplete list:
DJ Newswires-Nasdaq's list is far from complete as it stands.
Nasdaq, Other Exchanges Publish Threshold Sec. Lists
By CAROL S. REMOND
January 8, 2005 4:42 p.m.
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."
