The NYSE commissioned a $600K study to help explain why companies are choosing to do their IPOs elsewhere, rather than in the US markets.
I would love that gig. Sort of like being a dog psychologist - how do I get some of that easy loot?
Try this:
Companies understand that the US market system is an unregulated den of thieves where miscreants routinely destroy companies regardless of their merits. Thus, they have no interest in going public in this cesspool. You rip folks off enough, eventually they stop playing your rigged and crooked game.
There.
Just saved the $600K. No charge.
Or maybe they looked over the NYSE FOIA data that shows that Failure to Delivers are actually unaffected by a year and a half's worth of Reg SHO, and correctly concluded that there was no barrier to being shorted into the toilet?
Do these arrogant parasites really believe that they can rob everyone for decades, and that nobody will figure it out?
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Options Market Maker Wolverine, out of Chicago, sent in a letter to the SEC, commenting on Reg SHO. It was dated September 25, 2006, and the comment period closed on the 19. Still, why not make an exception for a participant accustomed to receiving exceptions from the rules? Think of it this way - they just failed to deliver the letter on time. No big deal. Happens every day.
The letter is noteworthy because it articulates clearly that the MM exemption allows the MM to hedge their put option positions at no cost, passing the cost to the equity investors in the form of dilution and delivery failures.
Read the letter here.
One of my favorite quotes:
"Presently, Wolverine is able to hedge options trades by selling shares short without first locating stock and generally is not subject to the mandatory close-out requirements for threshold securities. These exceptions allow Wolverine to continuously disseminate bids and offers (i.e., be on both sides of the market) because it can easily hedge market maker option trades with stocks that are illiquid and/or considered "hard to borrow."
Huh. So, exactly as the NCANS letter states, the cost of hedging put options is transferred from those speculating in the options market, and onto the backs of equity investors, who receive no benefit from that additional burden.
Nice.
And of course, the options MM doesn't want this free lunch at investor expense to end. No kidding.
I wonder where the SEC gets the authority to favor one class of participants and one market (derivatives) at the direct expense of another, separate market (equities)? I can't seem to find how that is consistent with investor protection, or in the public interest. I completely understand how it is in the interest of the options market makers, as otherwise they would actually have to charge more for options where the desired hedging securities are scarce, thereby annoying their customers with having to pay the freight for their speculation, and potentially cutting into the MM's profits. And it would really cut into the huge revenue stream from renting out your MM exemption to miscreant hedge funds who play your put options as a mechanism to create huge supply of naked short sale shares in Reg SHO securities.
I completely get how lucrative that trade is.
Who would want to have to pay for the benefit they receive, if they are currently getting it free? Who would want to have to charge manipulators more for speculating in securities where there is little liquidity, due to their having already naked short sold the target into the ground?
I couldn't have made their point better if I'd tried.
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Go check out Mark Faulk's latest. It's a barn burner. Really a good read.
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I am currently working on a petition supporting the NCANS letter, and a list of 7 milestones/demands that are required for there to be any faith in the integrity of the US markets. I will use petition online once it is drafted and edited, and I will encourage everyone to affix their name to the list.