Deep Capture Podcast: Episode 1
May 18th, 2008 by Judd Bagley
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.
Posted in Deep Capture Podcast |
May 18th, 2008 at 6:31 pm
Thanks again for the podcast. Regarding the optimistic prospects for results from the SEC, I read that the SEC investigation of the Bear Stearns takedown was closed without disclosing what, if anything, was learned. Cox declined to provide information on the investigation requested by Senator Arlen Specter. SEC uses its confidentiality of cases to go underground for unlimited intervals, letting interest in cases drain and never doing anything. So is something additional happening on Lehman’s allegations, or on anything else?
May 18th, 2008 at 9:13 pm
Will someone please discuss this question about naked short selling?
When an naked short sale occurs, what happens when the stock price begins to go up with FTD’s on the books? I have heard that the naked short position does not need to post more margin because there are no borrowed shares which must be returned to a lender.
This would mean that there would be no “short squeeze” on the naked shorts! Is this really true? How does the broker account for the market value of the naked short positions?
May 18th, 2008 at 10:31 pm
Judd, Patrick,
Chris Cox sounds completely unprepared for what is necessary. It is as if he is afraid to say the words for fear of offending someone. In his position, he needs to get help. He should get rid of Linda are at least take away her phone. How can you or any of us expect the smallest improvement when she is still enthroned? First they will limit the investigation. Then there will be the obligatory twiddling and if anything gets done, it will be the DOJ, not the SEC.
Spitzer overdid his extortionist tactics when moving on a target, he at least put fear in them. Cox’s responses were hedging. What would be wrong with saying, “We have already begun to look at the trading in BSC. If we find anything that is illegal, we will use all of our regulatory powers to make an example of those involved.”?
The run on BSC was not done in a vacuum. Why didn’t the SEC halt trading in BSC? Instead we got the massive bailout at the public’s expense that gave JMP a coup.
Never a mention of such a buyout being monopolistic, but such a large footprint was not only encouraged, the public that is supposed to be protected from these monopolies gets to pay the bill. There is so much more here than naked shorting. Market Reform? We need regulatory reform. What happened with BSC happened as if there was no regulation..whatsoever.
The SEC made the whole BSC raid possible because the traders knew that they could get by with the illegal behaviors. If there were the slightest bit of fear of regulation, the Bear Stearns run would not have happened.
The music was nice… just not enough of it. Good delivery, Judd.
May 19th, 2008 at 9:04 am
Great to see you adding some podcasts to this. I look forward to seeing more.
August 31st, 2008 at 3:05 pm
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!