Don't know you nor your level of expertise in securities law, so makes no difference if you respond to my post. It was intended for SRV. Simply pointing out that the existence is not only factual, but apparent to anyone who trades for a living, or even as a hobby. To think otherwise is very naive. Even EU zone recognizes and clamping down on NSS. SEE BELOW.
"EU Ministers Adopt Curbs on Naked CDSs in Short-Selling Law
By Jim Brunsden - Feb 21, 2012 8:07 AM PTTue Feb 21 16:07:03 GMT 2012
European Union finance ministers adopted a short-selling law that includes an optional ban on naked credit-default swaps tied to sovereign debt.
The legislation, which would also curb so-called naked short-selling of stocks and government bonds, was approved at a meeting in Brussels today. The decision marks the final stage in the adoption of the law, which was also approved in November by lawmakers in the European Parliament.
Investors buy CDSs as insurance to protect themselves from losses if a bond issuer defaults. A sovereign CDS trade becomes naked when an investor buys the swap without being at risk of suffering such losses."
Again, not knowing your level of expertise, the above explanation of proposed legislation in EU zone should demonstrate problematic NSS positions in the market, whether on CDS's, stocks, or options when a deep-in-the-money call option has the appearance of covering a short position. Due to options only requiring payment of a premium (a fraction of the PPS), and 1 lot is 100 shares, a call option(s) only need be bought at a premium for 1/100th of the short position to have the illusion of a covered short positiom.
From the sec.gov website: This should help you to further understand.
"Naked short selling can have negative effects on the market. Fraudsters may use naked short selling as a tool to manipulate the market. Market manipulation is illegal. The SEC has toughened its rules and is vigilant about taking actions against wrongdoers. Fails to deliver that persist for an extended period of time may result in a significantly large unfulfilled delivery obligation at the clearing agency where trades are settled. Regulation SHO is intended to address these effects by reducing the number of potential failures to deliver, and by limiting the time in which a broker can permit a fail to deliver to persist. For instance, as explained above, Regulation SHO requires brokers and dealers to close-out the open fail-to-deliver positions in "threshold securities" (i.e., securities that have experienced a substantial number of extended delivery failures) that have persisted for 13 consecutive settlement days.
Regulation SHO was designed to target potentially problematic failures to deliver. Prevention of fails is the goal of the locate requirement. Regulation SHO requires broker-dealers to identify a source of borrowable stock before executing a short sale in any equity security with the goal of reducing the number of situations where stock is unavailable for settlement. But, because the locate is usually done three days before settlement, the stock may not be available from the source at the time of settlement, possibly resulting in a fail.
Regulation SHO also requires some fail positions to be closed out. When a broker-dealer has a fail position in a "threshold security," and that fail position has persisted for 13 consecutive settlement days, the broker-dealer must take immediate steps to close-out the fail by purchasing securities of like kind and quantity. Even market makers that have such persistent fails in threshold securities must close-out their positions."
Hope this assists you and SRV to make wise trading choices in the future. Not sure if you own any SPNG shares, but there is obvious fraud of selling restricted shares into the open market via fake attorney opinion letters by insiders of company and associates, but if OBO + NOBO > A/S, it also indicates an uncovered position by short sellers.
Judge in this particular BK case is very aware of both possibiities and will not rule until all facts are known.
