Shorting was always supposed to be limited in practice. The brokerage allows the investor to purchase shares on margin, only fractionally backing the purchase with cash. In return, the brokerage was allowed to borrow that share and sell it.

If the buyer of the shorted share happened to buy on margin, it could be relent, but not if the buyer had a cash account.

In addition, if the person who originally bought on margin sold the share or requested the certificate, the potential daisy chain would collapse as everyone would be bought in.

The system actually worked pretty good until the 90’s when the brokerages decided they wanted to become banks and only fractionally back stock ownership. Rather than fulfil their roles as custodians, they breached their customers’ trust and lied about the assets they held in custody.

To me, the problem started when the DTC and NSCC merged to form the beast, the DTCC.

Dismantle the Federal Reserve and dismantle the DTCC and replace it with a transparent government organization.

It’s bullshit that something so core to our capitalist economy is based on opaque record keeping at the privately owned Fed and privately owned DTCC, who lie and manipulate for their own profit.

If the buyer happened to be margin, it could be relent, but not if the buyer had a cash account.

In addition, if the person who bought on margin purchased it back, the potential daisy chain was collapse as everyone would be bought in to return the share.

The system actually worked pretty good until the 90′s when the brokerages decided they wanted to become banks and only fractionally back stock ownership. Rather than fulfil their roles as custodians, they breached their customers’ trust and lied about the assets they held in custody.

To me, the problem started when the DTC and NSCC merged to form the beast, the DTCC.

Dismantle the Federal Reserve and dismantle the DTCC and replace it with a transparent government organization.

It’s bullshit that something so core to our capitalist economy is based on opaque record keeping at the privately owned Fed and privately owned DTCC, who lie and manipulate for their own profit.

The SEC could restore the uptick rule immediately, why aren’t they? Academic reasons? please spare us…

Global Task Forces To Target Short Sales, Hedge Funds
Tuesday November 25th, 2008

By Judith Burns Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- Global securities regulators have formed three task forces targeting short selling, hedge funds and unregulated financial trading, in an effort to take “urgent action” to coordinate responses to current market turmoil, Securities and Exchange Commission Chairman Christopher Cox announced Monday.
The newly formed short-selling task force, chaired by the Securities and Futures Commission of Hong Kong, will work to eliminate different approaches to “naked” short sales, including delivery requirements and disclosure of short positions, while minimizing any harm to legitimate securities lending, hedging and other transactions.
A second task force, co-chaired by Australian and French securities regulators, will focus on ways to increase oversight of and information about unregulated financial markets and products, including derivatives that trade over-the-counter. The third task force, co-chaired by British and Italian financial regulators, will examine ways to minimize risks associated with hedge funds, which are lightly regulated investment pools for wealthy individuals and institutions.
The announcement followed a teleconference meeting Monday of the technical committee of the International Organization of Securities Commissions, which Cox chairs. IOSCO is comprised of securities regulators from more than 100 countries, and its technical committee includes the world’s largest markets. The three task forces will present reports when the technical committee meets in February and at when the Group of 20 nations holds a spring summit.
Short selling is a legal practice that produces profits when stock prices decline. Short sellers borrow stocks for sale in hopes of replacing them later at a lower price. So-called “naked” short sellers do not borrow shares before selling them short, a practice that can produce punishing stock price declines, and one which the U.S. has tried to combat by tightening borrowing and delivery requirements for short sellers. Cox said that in order for attacks on trading abuses to be effective, they “must be coordinated across major markets,” and include derivatives trading and activity by currently unregulated entities such as hedge funds.
- By Judith Burns, Dow Jones Newswires, 202-862-6692;

Oh really??? In this climate of NAKED SHORT SELLING allowed with no “Uptick Rule” employed to stop the Financial Rapists, what makes anyone think that the perpetrators are going to find religion/morality/ethics and stop NAKED SHORT SELLING (easy money)?

Does anyone have any insight into Obama’s appointments of Geithner or Summers? Will either of these 2 guys put an end to Naked Short Selling or reinstate the “Uptick Rule”? Thanks for any insights.

I want to see justice ASAP.

Hang_’em_High

I will finish your sentence for you…

“I HOPE YOU”….

I HOPE….

Aside from any political views, I hope that the new Administration will appoint an SEC Chairman that will at the very least — level the playing field by stopping the Financial Rape via Naked Short Selling. The Bear Raids have been made too easy when SEC Rule 201 suspended the “Uptick Rule” on July 6, 2007 — causing these wide swings in the market.

I HOPE….

I hope to see JUSTICE. In any other industry, a gang of Financial Rapists would be held accountable and prosecuted to fullest extent of the law. I want to see handcuffs on the perpetrators and also those that allowed the Financial Rape(s) or Bear Raid(s) via Naked Short Selling to occur under their watch.

I hope to see ACCOUNTABLITY. The legislators that have had the whistle blown right in their ear — should be held accountable for doing absolutely nothing. Why hasn’t our elected legislators taken action by writing laws to protect investors from being Financially Raped? Orrin Hatch spoke-out against the “Fails-to-Delivers” reaching $6 Billion per Day! The ceiling should have shaken at those comments, but nothing was done to stop it! Why? Why? Why? Senator Robert Bennett made statements on the Senate Floor about Naked Short Selling as well. But, nothing was done to stop it. Why? Our government has failed to protect investors at so many levels, from elected-legislators to government regulatory agencies — nothing has been done to reinstate the “Uptick Rule” or BAN NAKED SHORT SELLING in the entire universe of publicly traded securities.

I HOPE….

I hope for JUSTICE. I hope to see real punishment, not a miniscule monetary fine — when the Financial Rapists are very-likely manipulating cumulative billions from investors.

I HOPE…..

I hope for TRANSPARENCY. I hope the DTCC/SEC will release “Fail-to-Deliver” information in real-time so that Bear Raids can be stopped! I also hope that all Naked Short transactions can be tracked — so that the perpetrators can & will be held accountable.

I HOPE….

I hope that everyone will help EXPOSE the Financial Raping of publicly-traded securities. Let us put the perpetrators in the SPOTLIGHT. Let the entire world know what they have done. I believe….if more people realized what has been done via Naked Short Selling, then the problem would be solved quickly by BANNING it forever.

I HOPE….

I hope for immediate action in the pursuit of justice.

Hang_’em_High

They have done the following:

Denied naked shorting existed when they KNEW it did

Grandfathered fails while taking YEARS to enact Reg SHO

Refused to take action on the option market maker exemption, thus enabling the creation of untold amounts of fake shares

Eliminated the uptick rule

Did NOT enforce the regulations regarding hard locate, borrow and settlement

When they did take action against traders the fines were a JOKE

They fired Aguirre, while protecting people with “juice”

They protected 19 financial companies last summer, some of which enablednaked shorting, while leaving unprotected the rest of the market

They subpoenaed journalists who were suspected of making negative comments about companies in co-ordination with short sellers, and then withdrew the subpoenas…(“juice again?”

All of this has contributed to the greatest loss of equity in modern times. Who were they protecting and helping?Who was hurt?

Let’s find out…

It’s enough- there should be a FULL INVESTIGATION.

To do a check on these statements look at the evidence from the Bank of International Settlements. Despite the belief that banks and financial companies are deleveraging there is almost triple the amount of derivatives as there was over a year ago at $1.4 quadrillion!

March right around the time Bear Stearns blew up. Incidentally, it has recently been discovered that Bear was likely attacked by other financial firms since it was long $12 billion in gold derivatives and was not doing its part in the gold suppression scheme. Bear was no more bankrupt than all the other major banks and brokers, however, with the incredible leverage these organizations have taken, (most all are leveraged over 30 to one), a rumor about such a firm’s liquidity will soon become a self-fulfilling prophecy since there is constant refinancing going on.

I disagree with the statement that short selling caps irrational exhuberance. Most short selling happens on the downward slide. What it does is increase the depth of the dip.

The whole strategy dramatically increases volatility.

The really super big problem with short selling is that it dramatically reduces the ability of a company to use their equity to raise money. As Deep Capture points out … whenever a publicly traded company tries using its capital to raise money for expansion, they are whammed with short selling which immediately knocks down the amount they could receive by a secondary offering.

This government is ignoring this financial 911 and are more than willing to let the unfree market work. They have done a remarkable job deytroying our economy and retirement savings of a nation.It’s completely amazing to see our legislators throw soft ball quesrtions at the hedge fund managers who are the only ones profiting from this.In the end our government understands what is going on but sprays water on the edge of the fire so as to pretend to do something. Without action we are going to go down much further.
It maybe to late but what we should do is develop a consortium of CEO’s whose companies have been under attack to come out publicly and ask their representatives to have the SEC implement full disclosure as to outstanding shares and who is short them.
Secondarily we need to bombard companies that want to go public with the truth. By doing this successfully we could deny the markets fresh meat.
I suppose with a new administration coming in there is some hope that they will try to enforce the rules, if not we will know fairly soon. Right now we just have to make it untill then. If we dare to plug in the worst scenario we can imagine the market will have dropped to 4000 on the DOW by January 20, 2009, unemployment will be pushing 9.0%. Maybe then Joe Sixpack will finally start asking the right questions if that’s possible.

Nothing will be solved unless there is a ceiling on short sales. Even if naked short selling were eliminated 100%, the scheme would shift slightly but continue unabated because shares can be lent and relent over and over again.

Theoretically, all the schemers would need is one single legitimate share to drive the short interest as high as they wanted to by lending and re-lending that one share amongst themselves over and over again like a ball bouncing off the walls.

The Original NCANS letter spells this out in detail as do other NIPC letters. Eliminating naked short selling is not enough. There has to be a hard ceiling as to how high the short interest can go. As for me personally, I think all short selling should be banned period – all kinds. Betting on the short side could still be done via futures and options, so long as there is no hedging in the affected equity.

The writers of those contracts have to take the risk exposure and not lay it of onto the equity holders.

And if these types of contracts are too risky or costly, then so be it. I think more damage is done via short selling than any benefits are derived from it. The Risk/Benefit of short selling equities doesn’t pencil out when considering the formation of capital, the benefit/loss to the issuers, employees and economy.
Tom