Forbes has another excellent article by Liz Moyer, which covers the SEC comment letters sent in by the industry's mouthpieces.
You can read her work here.
This is a short but sweet summary of an out-of-control industry, so arrogant that it feels that its lawbreaking should go uninterrupted by even so tame a hindrance as fair and prompt reporting - any hint of transparency sends Wall Street into a tizzy.
An example from the article:
"But banks have commented that the SEC should take care not to impose new rules that would damage the liquidity of the markets by clamping down on trading, put burdensome processes in place and force the disclosure of sensitive information.
"We oppose any requirement that firms publicly disclose their fail positions," wrote Gerard Citera, the executive director of U.S. equities at UBS Securities, in his letter on Sept. 22. "This information is proprietary to the firm and its customers and could result in disclosure of confidential information such as trading strategies."
Uh, did I miss the memo where illegally failing to deliver that which you were paid for is a trading strategy?
Maybe jumping out of a car and running into a bank to rob it is a trading strategy, too, and should be protected by secrecy. Or even better, the identities of the robbers should be kept secret, but a list of the victimized banks published, with a host of articles discussing how only the crappy banks are being robbed, and how they sort of deserve it for having substandard security...
Everybody getting it loud and clear? Taking your money, and then refusing to deliver what you paid for, as they sell millions of shares they have no intention of delivering any time soon, in order to drive the price of a stock into the toilet, is now a trading strategy. How nice. Fraud is a trading strategy.
I'm sure that's how Wall Street views defrauding customers, but doesn't that sort of conflict with the pap they continually disseminate: that most failures are innocent, and don't constitute a deliberate mechanism to game the system? Which is it? Is it no problem, as it is a tiny fraction of trading, and mostly innocent anyway, or is it large enough to harm liquidity, and hurt proprietary and likely illegal trading strategies - WHICH ARE DE FACTO DELIBERATE? Strategies aren't accidental. The term implies planning, and forethought. Nothing accidental about it.
Seems like this industry will tell whichever lie they think will get them what they want - truly a society of sociopaths.
And they think we are stupid enough to believe this crap?
Here's another Chewbacca-esque bit of tripe from Wall Street:
"The SEC will provide the trade failure data, but only on request and only after a two month lag. NSCC and others defend the delay by saying earlier disclosure of specific stock failures could jeopardize proprietary strategies.
"Such an outcome would discourage legitimate short sellers from expressing their views," Thompson said. But, he said, providing aggregated information and not disclosing specific information about failed trades by individual firm, "may help alleviate some of these concerns."
WTF?
How would publishing the amount of failing to deliver in a stock discourage legitimate anything? Where is it written that failing to observe Section 17A's mandate to promptly deliver the shares you sold is how any legitimate short seller should be able to express their view? What kind of upside-down idiocy is this?
Again. Slowly. Legitimate short selling involves borrowing a share, selling it, and delivering it to the buyer.
Illegal stock manipulation involves placing sales orders you have no intention of delivering on, and doing so simply to tank a company's stock price. That is how failing to deliver as a strategy works. It is NOT a legitimate expression of a view, unless that view is, "I should be able to destroy stocks I target without any restrictions imposed by the 1934 Act."
Are these people so far gone that they don't see how their statements are confirming our worst fears about how they think?
Yikes.
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I was reading with alarm the spin doctoring from the industry, and all the letters submitted well after the deadline of September 19, and got it into my head to fire off a missive that summarizes the dishonesty with which the SEC is spinning the data, and presents in a few pages a quick take on why the system is broken.
You can read the result of that effort here.
It's not intended to be a duplicate of the NCANS letter - that is the white paper, if you will, that defines the genre of solution proposals.
This was intended to be a loud shout of "Bullsh#t" after wading through all the industry commentary that is reliant upon the SEC's false and misleading representations of "success" with Reg SHO.
Those letters actually make my points for me pretty well.
So, let's see how many more of these letters they submit, touting nonsense as fact.
My bet is not many after they get done reading mine. Because now they have to refute the FOIA data, and they can't. So they can't mount arguments that are predicated on a lie.
Mission accomplished, methinks.