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SHORT SELLING, DEATH SPIRAL CONVERTIBLES, AND

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bartermania   Saturday, 04/16/05 12:18:37 AM
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SHORT SELLING, DEATH SPIRAL CONVERTIBLES, AND
THE PROFITABILITY OF STOCK MANIPULATION

John D. Finnerty
Professor of Finance, Fordham University
March 2005

Abstract

The SEC recently adopted Regulation SHO to tighten restrictions on short selling and curb
abusive short sales, including naked shorting masquerading as routine fails to deliver. This paper
models market equilibrium when short selling is permitted and contrasts the equilibrium with
and without manipulators among the short sellers. I explain how naked short selling can
routinely occur within the securities clearing system in the United States and characterize its
potentially severe market impact. I show how a recent securities innovation called floating-price
convertible securities can resolve the unraveling problem and enable manipulative short selling
to intensify.

The rest of the article is here: http://www.ncans.net/files/ssrn-id687282.pdf

_________________________________________________

Eliminate all shorting.



- I will not be a slave to or of death cults - n/b/k - NO QUARTER FOR CORRUPTION http://investorshub.advfn.com/boards/board.asp?board_id=3319
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