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3. The sham resets were accomplished by optionsXpress facilitating its customers buying shares and simultaneously selling deep in-the-money call options that were essentially the economic equivalent of selling shares short. The purchase of shares created the illusion that the firm had satisfied the close-out obligation; however, the shares that were ostensibly purchased in the reset transactions were never actually delivered to the purchasers because on the same day the shares were “purchased,” the deep in-the-money calls were exercised, thereby effectively reselling the shares.

4. These paired reset transactions were not bona fide purchases because their purpose was to perpetuate an open short position while giving the illusion of satisfying the delivery and close-out requirements of Reg. SHO. These sham transactions thus allowed optionsXpress and its customers to engage in what amounts to a stock-kiting scheme that deprived true stock purchasers of the benefits of ownership.

5. During the relevant period, optionsXpress and several customers, including Feldman, routinely engaged in these paired sham transactions in a number of securities, including Sears Holding Corporation, American International Group, Chipotle Mexican Grill, Inc., Joseph A. Bank Clothiers, Inc. and Mead Johnson Nutrition Company. As a result, optionsXpress and its customers had continuous failures to deliver in these and other securities that persisted for months, thereby undermining the purpose of Rules 204 and 204T of Reg. SHO.

http://www.sec.gov/litigation/admin/2012/33-9313.pdf