So, more FOIA data on fails in two prominent companies. What's the pattern?
The fails clear up, even as the price goes down, or stays depressed.
Huh.
An old friend of mine, with a lot of brokerage experience, once said that contrary to popular opinion, supply and demand doesn't impact volume. Price drives volume.
The more folks forced to sell due to margin calls and a sustained, depressed price, the easier it is to clear your fails at a profit.
Simple.
Also illegal.
It is called stock manipulation, or more specifically, a bear raid.
The question is, who has been doing it across all these companies? The answer can only be: the market makers.
They are the only ones that have the capability to drop the stock price, meet all buy orders with volume (often fails), and take the price down to a level where holders give up in disgust, or are margin-called out.
Same game as the 1920s.
So, how can we see this, in SHO company after SHO company, and yet apparently the SEC can't?
Same pattern with minor variations.
See no evil, speak no evil, and tell damaged shareholders it is all in their heads.
You can see the data in the FOIA section.
We are still waiting for the 2004 data, as that is when the price in NFLX tanked during a huge short assault. Then again, Canada was very active back in NSS in 2004, and the domestic FTDs didn't really start to spike in most of these until halfway through the year in 04. Makes one wonder who knew about the grandfathering clause, and when, no?
Dave has been tenacious in obtaining this data, and every time we get more info, it paints a clearer picture. A system, gamed by a few bad apples, to destroy the price of the targeted companies.
I sense more shareholder suits against the prime brokers and the specialist firms in the near future. Anyone else getting that feeling? I'm sure folks who were wiped out in NFLX will be interested in what group(s) was selling the stock price down 85%, and being allowed to fail like mad. I don't believe that is the definition of bona-fide market making, but I could be wrong.
Again, the NFI shareholder suit should be an interesting test of this system - and of the integrity of the largest players in the markets.
Cynics point to the litany of fines for crookery they all pay every year, always dodging real pain or meaningful censure. I wonder if a jury of twelve ordinary folks will feel as generous about Wall Street's interests as the SEC usually does?
My hunch is no.
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The critics and foes of this site, and of the whole market reform movement, have used barrels of ink to portray the advocates who've worked long and hard to expose the naked short selling/market manipulation issue as loons, nuts, kooks, conspiracy theorists. We've seen articles attacking Dr. Byrne, we've seen articles attacking the Easter Bunny, we've seen press releases attacking Dr. Trimbath, and Robert Shapiro...you name it, the tactic has been to dismiss the problem as a non-issue, and label anyone concerned about NSS as wearing a tin-foil hat. The Motley Fool, the WSJ, The NY Times, Barron's, virtually every NY Financial publication has gotten into the act, and even hack authors have made pseudo careers out of demonizing and dismissing, obviously on behalf of powerful special interests on Wall Street.
But ever since the Senate Hearing the tone has shifted, and evidence of this new treatment can be seen in Forbes, the WSJ, and Dow Jones. Suddenly everyone isn't giggling about how silly we are, and dismissing naked short selling as some little technical glitch unworthy of attention.
Harvey Pitt has a remarkably lucid article in Forbes, describing succinctly the problem the securities industry has with the naked short selling issue. It should be required reading. Again, ironically, it is almost a year and a half ago I was sitting briefing Chris Forbes and the senior editorial staff of the width and breath of this problem - I suppose that will give you some idea of how rapidly the publishing world works. Pitt, who is no stranger to the SEC and Wall Street, no doubt understands precisely how ugly this is likely to get, and how compromised some of the players are. I would view this as a warning shot from an industry insider that this is going to blow up in the big brokers' and hedge funds' faces.
And Judith Burns has a good article on tomorrow's SEC hearings on Reg SHO. Very diplomatically describes the shortcomings of the rule, and some of the band-aids being contemplated by the Commission. My fear is that what will be done is much discussion of making some amendments at some point down the road, and then maybe voting on it, and then enacting it....like two years after the money was taken, and the shareholders fleeced. Still, the article is a good one, and Judith Burns can be counted on the one hand that represents honest financial press. Then again, she's not in NY, so that might have something to do with it...
I really would like to see an end to the grandfathering clause, and an iron requirement for a borrow, and a host of other things, but I will believe it when I see it.
I would love to be shown the light tomorrow.
I will be holding my breath.