In this episode, I demonstrate the existence of illegal short side stock market manipulation, and point to recent events as evidence that those responsible for this form of fraud will shortly taste some long-delayed justice.
Market Reform proponent Patrick Byrne also offers commentary.
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Theme music composed by Derek K. Miller: a musical genius, a great guy, and a soon-to-be (I pray) cancer survivor.
Fred D.,
Good question as the answer to it helps reveal the heinous nature of abusive naked short selling (ANSS). If the PPS of the company under attack goes up then those naked short the stock need to post more collateral on a daily “marked to market” basis. This is not much of a deterrent to billionaire behemoth hedge funds that are leveraged 30-to-1 by their “prime brokers”. The heinous aspect is revealed as the PPS tanks. Since the collateralization requirements go down as the PPS goes down the investor’s funds unconscionably flow into the wallets of the naked short sellers despite the fact that they continue to refuse to deliver that which they sold. I refer to this as the “Ultimate paradox” on Wall Street. The worldwide authorities on clearance and settlement systems including IOSCO and BIS (the Bank for International Settlements) unanimously agree that the seller of securities should never be given access to the purchaser’s funds until delivery is made “in good form”. This is referred to as “Delivery versus payment” or “DVP”. The DTCC was mandated by Section 17 A of the ‘34 Act to “promptly settle” all securities transactions. “”Settlement” is defined as the conclusion of a securities transaction wherein that which was sold is delivered in exchange for the delivery of the funds of the buyer i.e. “DVP”. The DTCC refuses to base the U.S. clearance and settlement system on DVP as recommended. These trades don’t legally “settle” promptly or any other ways. UCC Article 8 noticed that there were indeed legitimate reasons why “good form delivery” couldn’t be achieved by then T+5 which is now T+3. They then allowed brokerage firms to credit the accounts of buyers of undelivered shares with readily sellable “securities entitlements/IOUs”. The authors of UCC 8 knew that these would damage the PPS of the issuer involved because they would add directly to the number of readily sellable “shares and/or securities entitlements”. Their assumption was that these truly “legitimate” delivery failures were so short-lived (perhaps 2 or 3 days long) that the damage would be minimal. The authors also knew that the DTCC had the mandate to “promptly settle” all trades and as an SRO they were to monitor the “business conduct” of their participants. The authors also knew that the SEC had the congressional mandate to provide “investor protection and market integrity”. They figured that both the SEC and the DTCC would be all over any disguising of “illegitimate” or “strategic”delivery failures (as per Dr. Leslie Boni) as being “of a “legitimate/ultra-short termed” nature and therefore the risks of severe damages to share prices was minimal. They were wrong as it turned out that no regulator or SRO was monitoring for the age, number or “legitimacy” of delivery failures held either at the DTCC or in “Ex-clearing” hiding places. OOPS!