The NYSE fined four brokers for violations of Reg SHO reporting requirements - specifically, for failing to correctly account for FTDs.
The brokers are Daiwa Securities America Inc., Goldman Sachs Execution & Clearing , Citigroup Global Markets Inc. and Credit Suisse Securities.
From the more comprehensive Dow Jones account:
" NYSE Regulation censured and fined Daiwa Securities America Inc. $400,000 for failing to prevent a proprietary trading desk from effecting 103,000 short sales between Jan. 3 and April 15, 2005, without obtaining locates.
In a press release Monday, the NYSE said another proprietary trading desk at Daiwa failed to document compliance with the locate requirement, and the firm failed to mark certain proprietary orders "long," "short" or "short exempt."
In addition, NYSE Regulation censured and fined Goldman Sachs Execution & Clearing LP $350,000 for relying on customers to mark orders "short exempt," failing to monitor customer short sales to ascertain whether previous borrowings had resulted in timely deliveries, and marking orders for one of its own accounts as long when they were short sales.
NYSE regulation also censured and fined Citigroup Global Markets Inc. $250,000 for improperly accounting for failures to deliver in threshold securities, not having procedures to resolve fails in threshold securities that existed for 13 days, and not having policies to prevent a short seller from covering short sales in the Regulation M restricted period with offering securities bought from a participant in the deal.
Also, NYSE regulation censured and fined Credit Suisse Securities (USA) LLC $250,000 for failing to obtain locates for certain short sales it effected for clients to whom it provided algorithmic trading execution services, and failing to monitor whether customer "long" sales repeatedly required borrowed shares for delivery. "
Now, does that mean that the Reg SHO list data isn't correct? If these firms were incorrectly reporting data then the list and FTD data are incorrect, and low. How low? We don't know. We also don't know the specific number of shares involved, or which companies/issuers were involved.
In short (pardon the pun) we don't know anything except that the firms paid a pittance, and didn't admit anything.
Except that they were basically ignoring the rules, and masking their naked short sales as anything but. Sound familiar?
One wag commented, "Daiwa got ripped an astounding $3.88 per violation. I got a speeding ticket for doing 32 in a 25 with a four cylinder Honda, and it was 156 bucks. And there was no upside. This is just unbelievable."
To put this into perspective, each short sale was likely many thousands of shares, given they were for the big desk at a major house. That means that the fine likely amounts to fractions of a penny per share. And this is the big deterrent? Ha ha ha ha ha.
I wonder how that will play in the NFI shareholder suit against these same prime brokers for doing precisely the same thing as part of a collusive manipulation scheme? We know they are doing it - fines like this tell you they get caught with regularity - and we know they do it to trade for their own accounts.
Wonder how a jury of 12 will feel about that? I suspect that discovery is going to cause some resignations at those firms...