The Authoritative NSS Page

[patchman]

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

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

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

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

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

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

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

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

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

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

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