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How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information...UPDATED 8/13

Location: Blogs Bob O'Brien's Sanity Check Blog    
Posted by:   bobo 8/8/2008 9:30 AM

UPDATE 8-13. NIPC has drafted a comment letter to the SEC on its umpteenth deliberation on eliminating the market maker exemption to REG SHO. You can download it here. It spells out exactly why the SEC's recent emergency action is a load of hooey, because if the SEC enforced the existing laws on the books, there would be no need for new emergency actions. It also spells out why REG SHO's supposed crackdown on FTDs is a load of bullocks. What the SEC really should do is remove the locate loophole and require a hard borrow, and eliminate the abusive market maker exemption - then it wouldn't need to do anything more but enforce the laws already in place. Instead, it has created contradictory and more liberal rules, a la SHO. Why the hell is it so difficult for the SEC to just enforce the federal securities laws, instead of doing decade-long contortions to avoid doing so? Fair question. Afraid I already know the answer. And it has resulted in a financial system that is moments away from running headfirst off the cliff.

I would suggest any and all to add your own comment letters to the SEC, demanding that the SEC respond publicly to the very reasonable sets of questions in the letter. Wanting to understand why the cops aren't enforcing the law is a fair inquiry, I think...

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How big is the problem? I mean, we hear the now famous $6 billion delivery failure number tossed around from the DTCC, but how accurate is that, really? Is it a complete answer? Is there more information that is knowable?

The answer is, yes, more is knowable.

"Approximately US$1.8 trillion worth of trades remain outstanding and unsettled globally every business day, contributing significant credit and operational risk exposure to the trading participants."

That from the document at Touchbriefings.com. Huh. $1.8 trillion is a big number, even by Pentagon standards.

http://www.touchbriefings.com/pdf/1417/kumar.pdf

Or how about this? From the DTCC:

"For example DTCC estimates that 5% of secondary market trades fail to settle each day. With approximately $4.5 trillion of settlement value in 2004, failed transactions equal $ 225 billion daily."

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=849224

Alternatively, we can go to the UK Exchange Handbook, which contains some fascinating perspective on our wondrous settlement system.

http://www.exchange-handbook.co.uk/index.cfm?section=articles&action=detail&id=38756

If I read it correctly, it says that at least 5% of DTCC transactions fail to deliver.  It also hints at delivery failures because of the CDS direct cross border link into the DTCC and between the prime brokerages.

"One of the problems in assessing how reliable, and hence safe, a market settlement system is concerns obtaining reliable data on such matters as failing transactions -- let alone ascertaining exactly where liabilities lie during the settlement and subsequent on-going custody of the assets. In the more advanced markets, such as those in the UK and the US, the local regulators have ensured that reliable transaction data is readily available in a very transparent manner. In these markets, when the depository advises that they have a fail rate of approximately 5% (in the case of DTCC) or approaching 1% in the case of CRESTCo in the UK, one can rely on such figures."

"This research is supported by the DTCC white paper, which reports that 6% of institutional transactions being settled on an average day are expected to fail, while the fail rate on the market-side is lower at 4.4%."

Huh. Very interesting. Again, sounds larger than that $6 billion per day, which many assume is a rolling total. I mean, 5% of everything they process fails? After netting and the stock borrow program have minimized the number that could fail? That is an amazingly large number, 5 times larger than what happens in Britain. Scary part there is that we are now talking after the replenishable pool from the stock borrow program is used, and presumably massive numbers are shunted ex-clearing, and not counting desked trades, and after CNS netting handles the vast majority, we still have 5%? Yikes. Makes me start to believe that the true number is many multiples of that 5% number. Anyone with hard data that can show that assumption isn't true is welcome to bring it on. Facts are facts.

So then, in our quest to understand it all, we turn to the actual white paper published by the DTCC on settlement issues, and we get more data. Much more.

http://www.dtcc.com/downloads/leadership/whitepapers/settlement.pdf

"FAILS AND RECLAIMS
This shortfall in effecting STP is largely an efficiency issue. Fails and reclaims are another matter. They create risks for participants and for the system as a whole.

Because fails are quite common in today’s system, it falls far short of straight-through processing. Currently about 5% of trades fail or are “dropped” at the end of the day — about 20,000 from CNS and 15,000 from non-CNS deliveries for a total of about 35,000 of the typical day’s 700,000. This doesn’t include “fails to deliver” that aren’t even introduced into the system, which would make the fail rate higher (that's ex-clearing they are discussing, BTW - Bobo). Fails create significant risks for the deliverer and receiver. When a fail occurs, the deliverer is short of funds (although a firm can lend the securities it has and replenish them in normal market circumstances). Both the deliverer and the receiver have portfolios that are not what they expected. Although a fail does not create a credit, counterparty or principal risk, it does create a liquidity risk for the deliverer. And institutional trades that fail create position risk for both deliverer and receiver.12

Most fails occur because positions are not available; that is, the deliverer does not have free inventory. Stock lending can, of course, overcome this, as long as the lent stock is available quickly enough. When, as is usually the case, the lender receives sufficient cash collateral from the borrower, the credit risks associated with stock lending are small compared with the benefit of eliminating settlement fails."

Huh again. So, 5% fail PER DAY, not counting ex-clearing. Not a rolling number, but per day, unless I am reading this wrong. I don't think I am, but it is always possible, and I would welcome brighter minds than mine shedding light on this if I'm getting any part of it wrong.

So, this is a big, big problem, and it isn't happening because the dog ate the certificate. It's happening because the brokers just flat out don't have what they sold. As in, fraud. No got the doggee in the window I took the money for.

How big is the total problem including ex-clearing? Nobody's telling how large ex-clearing is, but we have some hints that it is much larger than the in-system fails. If so, we are talking systemic meltdown sort of size, and it underscores why the industry fights so hard to pretend that it is all a minor issue, or lunacy from fringe kooks.

Kinda tough to argue that with the above citations, isn't it? Oh. Those.

So the turd brigade posts like mad over at the Standard, hoping to remove any semblance of intelligent thought from the discourse. They accuse Patrick of being a cheat or a loon, they accuse me of being a stock manipulator or crazy, but what they don't do is cite hard fact to support their ramblings. Nothing new there. They think we are all stupid. They are the masters of the universe. We are the sheep. Problem is, every now and then the sheep figure it out, and it makes stealing everything the sheep own harder, which they don't like. Because all thieves and criminals prefer easy money - that's why they are thieves and criminals, versus productive members of society.

But I digress...

Special thanks to DavidN for digging these up.




 
Copyright ©2008 Bob O'Brien
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Comments (47)
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information... By stryker-ny on 8/9/2008 7:20 AM
Trillions eh Bunny !!!..now I know where that bonus money Wall Street throws out to everyone and his mother every year comes from. The insidious thing about it is they give everyone a vested interest in perpetuating the fraud.Even the City of NY which receives over three billion in taxes each year, keeps its mouth shut, and that goes right up the line to the Senate and Congress...Hey I want in on this scam too...
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information... By Sean on 8/9/2008 9:06 AM
Bobo, I notice where evever you post these "miscreat helper" wanna be players come after you to confuse the issue of the 8 billion a day in fails, well let them try to dispute this one. This should be good from here on.. LOL!!Good stuff by the way. Thanks.
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information... By davidn on 8/12/2008 12:41 PM
Qualified special representatives get to pre-net. Pay special note to the ones who pre-net for CDS (Canada) which then pre-nets before going into the DTC.

http://www.dtcc.com/customer/membership/nscc-qsr.php
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information... By davidn on 8/12/2008 12:38 PM
Some excerpts on how trades are pre-netted, possibly warehoused for days or longer before being submitted to the NSCC:

http://www.sec.gov/comments/sr-nscc-2006-04/nscc200604-9.pdf

It takes very little assets to become a market maker. What would stop a market maker from compressing trades with a hedge fund they own, which pretends to have an offsetting buy for their naked short? Who audits and regulates compression?

Summarization is the practice of combining like-sided trades by executing/correspondent broker, and compression is the practice of combining like-sided trades by clearing broker. While NSCC is not aware that fms are actually netting opposite-side trades prior to their submission to NSCC, the proposal seeks to prohibit all forms of "pre-netting" for trades ultimately submitted to NSCC for clearance and settlement.
place a practice of delaying input to the clearing corporation until late in the trading day.

allowing clearing and executing firms to "warehouse" trade data throughout the day (so that they can summarize or compress it later) makes it extremely unlikely that NSCC could meet the targeted recovery and resumption objectives


Discussions with firms have indicated that bilateral "compression" arrangements do exist between many QSR's (or the automated execution systems that they clear for) and their customers. The level of compression was then estimated first, by performing a distribution analysis on the trade data by trade share size, marketplace and price, and then by comparing trade share size and prices from those markets where NSCC receives trade submissions on trade-for-trade basis against over the counter activity, which includes QSR submissions.

In fact, the practice of correspondent brokers pre-netting their trade data prior to submitting that data to their clearing broker compromises the clearing broker's ability to reconcile a trade break in a compressed or summarized transaction, without having all the underlying trade details.

The most notable example of a Member's failure brought about by the activities of its correspondents was the 1995 failure of Adler, Coleman Clearing Corp ("Adler"). Adler was primarily a clearing fm acting for 42 introducing fms and clearing trades for over 66,000 customer accounts. Adler's demise immediately followed the collapse of Hanover Sterling & Company, Ltd. ("Hanover"), one of the introducing fms whose trades Adler cleared. As determined by the SIPC Trustee appointed to liquidate Adler, Hanover's failure was due to massive, organized short selling in various securities as to which Hanover was an underwriter and market maker. The short selling activity that led to Hanover's demise ultimately caused Adler's financial collapse. Through its trade guaranty, NSCC took on and settled Adler's outstanding trade obligations. As a result, NSCC sustained a loss in liquidating those positions.

Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information... By davidn on 8/12/2008 12:43 PM
The deadline for the NSCC rule to get rid of pre-netting expired May 2006, yet they are still actively posting comments.

http://www.sec.gov/comments/sr-nscc-2006-04/nscc200604.shtml
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information... By davidn on 8/12/2008 12:44 PM
http://www.sec.gov/comments/sr-nscc-2006-04/nscc200604-10.pdf
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information... By davidn on 8/12/2008 12:45 PM
http://www.knight.com/InvestorCenter/AR/pdfs/Knight2007AR.pdf

pg. 17

Knight traded 2.6 million trades totalling $29 billion on their peak day. That's $11,000 per trade which means these are probably already netted amounts.

pg. 63

Knight's direct (presumably naked) short position: $335.3 million

In addition:

Knight has failed to deliver $382.5 million and failed to receive: $117 million

This is after all their internal netting which presumably reduces their obligations 98%.

As I understand it, they wouldn't be included in DTCC fails or SIA fails. Knight is just one of a half dozen ECN's complaining about proposed rules from 2006 to ban netting.
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information... By Paul on 8/12/2008 11:00 PM
So what am I missing - now that 8-12 has come and gone - where is the SEC at their 19 favorite banks
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information... By beegdawg on 8/12/2008 11:01 PM
Harvey Pitt, former SEC chairman, is now calling for an all out ban on naked shorting.... This is good news!!!

http://www.google.com/search?q=harvey+pitt+naked+short&rls=com.microsoft:*:IE-SearchBox&ie=UTF-8&oe=UTF-8&sourceid=ie7&rlz=1I7ADBR
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information...UPDATED 8/13 By Pete Stevenson on 8/17/2008 8:31 PM
Bobo,

I have no idea if this is real. What we do know is that negotiations are going on now to solve this mess, and who ever posted this is on the money. And this isn't going to be easy. Anyway, this is getting around, and it's very good.

Please post this here for comment from others.


SEC Preliminary Guidelines of Naked Short and Fail-To-Deliver Reform(condensed highlights in rough draft form)

DTCC & NSCC Federal order to open their books via DOJ, ICC, and SEC

To protect the privacy and practices of current trading strategies, a new regulation (Regulation FTD) will be mandated to provide a daily list indicating all open fails on every security where one exists in the marketplace. The total of fails shall be updated daily on each security. No equity or derivative shall allow any borrow from any entity until all current and past fails are eradicated.

Immediate buy in on all current and existing fails out side of 13 days. Current fails have up to the mandated 13 days per Regulation SHO to "buy-in" and be covered.

Going back to introduction of SHO, any fails never bought in and covered will be "busted" and accounts disgorged with fines. Current fails listed on the Regulation SHO list outside of 13 days will be bought back in at market effective immediately.

All fails since the introduction of Regulation SHO will be reposited to every broker-dealer, market maker, hedge fund, and individual account as a short sale by cusip replication on a journal basis for the extent of time they were in fail status. No actual trade will occur. The fail will remain in the account affected for the entire time the position was in fail status. The position must be covered in such time or shall be "bought in" by the SEC and DOJ. Example: If the fail occurred exactly 3 years ago, it will remain in the client account for three years.

No additional short position shall be allowed on any particular security or derivative in which a journal entry exists or a current fail is open until that position is either bought in by the party involved or by the deadline of the fail period noted.

Any party affected with a particular fail can and may buy in to cover the open ledger entry fail at any time before the end of the period of original fail.

When fails are recovered on the open market, subsequent journal entries will be made affecting every equity or derivative to retire those securities from circulation and return those companies affected back to their exact oustanding and authorized shares.

By way of example, if the market maker SBSH or NITE or UBSS has net fails of 1.2 trillion shares over the past 3 years since the introduction of SHO, then those parties that traded those shares in net fail status shall have 1.2 trillion shares placed back in their account net short. They may not execute a short on that particular security at any time until the exisiting fail is covered by an order to buy on the open market. Each market maker will take the proper measures necessary to clear the fails recorded and report the transactions accordingly to their corresponding broker dealers. In finality, each broker dealer has 24 hours to accurately report the journal entries and "buy to covers" to their associated client accounts. No individual client may affect the buy-in on their own. The transaction must come at the broker-dealer level as prescribed by the commission. Any customers who end up with a deficit balance in their account as a result of these transactions will have their accounts closed and appropriate action will be taken to recover those losses beyond the capital in their account.

Should a company no longer be in existence then those fails will result in a special task force designed to reverse all transactions involving a fail that occurred from the introduction of SHO until the company's exit from the market. All monies involved in the failed transaction will be pooled and disgorged from the parties account that initiated the fail. A list of all shareholders that held that particular equity from the introduction of SHO until its exit from the market will be compiled. All monies will then be divided among the shareholders of record and returned to them by equity.

A separate task force will be implemented to calculate all fails "ex-clearing" of the DTCC. An intercontinental coalition will be formed to force the buy in under the same regulations for all foreign entities. They will then be extradited to the United States for prosecution.

To protect the privacy and practices of current trading strategies, a new regulation (Regulation FTD) will be mandated to provide a daily list indicating all open fails on every security where one exists in the marketplace. The total of fails shall be updated daily on each security. No equity or derivative shall allow any borrow from any entity until all current and past fails are eradicated.

It is expected the SEC, ICC, and DOJ will employ 5200 employees for a period of 48 months to complete the process with the option to extend for up to 12 months. The cost of such a program is expected to be $1.5 billion and shall be born by the entire program on a "per fail" charge basis to the offenders involved. At the conclusion of this program, the DTCC and NSCC will become a branch of the government and fall under the auspices of the DOJ.

Th Securities Act of 2008 will be set into effect and will include but not limited to:

No further naked shorting of any kind will be considered legal or acceptable by any measure or entity. Details of the only acceptable measure to initiate an open short position will be released at a later time.

Regulation FTD to list all past net fails and current fails on a share basis.

Full hedge fund disclosure of all positions held and timely reports filed with the SEC.

The immediate initiation of full electronic trading across all exchanges and trading vehicles. No algorithmic programs will be accepted or allowed.

Regulation NMS will be rescinded indefinitely immediately preceding this order.
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information...UPDATED 8/13 By tommytoyz on 8/17/2008 8:29 PM
Bobo deserves credit for editing the letter and making corrections. Take a bow!

I was reviewing the FOIA letter I received from the SEC and regret not hitting the FTR issue even harder, because the SEC says in their letter :....the commission does not have or maintain fails to receive data." What????!!! Are they serious?

It is the single thing that will bring down the financial markets and they don't track it at all?

FTDs actually show up as a benefit, as accounts receivable to broker-dealers on their balance sheets, because the money paid by the seller is held by the clearing agency for the sellers on a mark to market basis. As the price goes to zero or if delivery should ever occur, that money is earmarked for the sellers - the broker-dealers.

Fails to Receive on the other hand are pure liabilities for broker-dealers as these are securities owed their clients, also calculated for balance sheet purposes on a mark to market basis.

If the FTRs ever had to be delivered, the money it would take to do so would exceed the FTD benefit held for them many times over. The net capital available to NYSE broker-dealers is about $102 billion Dollars.

The most the cost to deliver all the FTRs can be before they have to declare BK is $219 billion. At that amount they will have no cash at all. On a mark to market basis, the liabilities are shown as $140 Billion. The cost only needs to rise by 57% over what they are claiming the delivery liabilities are, and they're Bankrupt. Anything near or over 219 Billion to close out their FTR liabilities and they're Stearned.
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information...UPDATED 8/13 By Willie Loman on 8/17/2008 8:30 PM
Bob,

NIPC's comment letter to the SEC is absolutlely bloody eh-fing brilliant. I hope it gets their attention (hard to avoid). I know this issue of naked shoring has been enervating for everyone affected by it (as in, "you can't fight city hall"), but I would urge everyone who has been affected by naked shorting to read as much of it as they can. It may sound dry, but from a legal (administrative law) standpoint, it is absolutely bloody eh-fing brilliant. THANK YOU, NIPC!!!
Re:Naked here, naked there, naked mthrfkrs everywhere.... How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information...UPDATED 8/13 By rmr on 8/19/2008 7:38 PM
AT: http://www.investmentrarities.com/08-18-08.html

TED BUTLER COMMENTARY
August 18, 2008

The Lessons of a Lifetime

(This essay was written by silver analyst Theodore Butler, an independent consultant. Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)

In order to understand where you may be going, it is important to understand where you have been. Nowhere is this more true than in silver. The historic price sell-off, coupled with the obvious shortages in almost all forms of retail physical silver present the lessons of a lifetime. I believe that how we learn from this lesson will determine our future financial situation, good or bad.

The drastic sell-off in silver (and gold) is further proof of an ongoing manipulation to the downside. My advice to own real silver on a fully paid for basis, has been borne out. Real pain exists among those who held silver or gold on margin. Many leveraged investors have lost their positions because they couldn’t meet margin calls. Meanwhile, no fully paid up investors sold because they had to come up with more margin money. That’s lesson number one.

The Anatomy of a Crime.

What we just witnessed in the historic sell-off in silver and gold was a crime. That’s not a crybaby complaint. There were no supply or demand developments that could account for the severity of the sell-off. The proof that this sell-off was criminal lies in public data provided in the Commitment of Traders Report (COT) and a basic understanding of how the futures market works. This has been the most extreme sell-off in the recent history of silver and gold. We are farther below the moving averages than at any point since I have been writing about silver. Price movements this severe are likely to be intentional and not accidental.

Every criminal act must have a motive and an opportunity to commit the crime. By the simple process of elimination, those responsible for this crime are the concentrated commercial shorts on the COMEX. No one else fits the profile. They had the means (through their dominant and monopolistic position), the profit motive and the skill to cause the sell-off.

I can’t identify the concentrated shorts by name, as commodity law protects their identity. But the regulators certainly know who they are and continue to choose to do nothing about them. (They also knew the identity of the SemGroup, which appears responsible for the recent run up and collapse of crude oil prices.) While I can’t identify the perpetrators by name, I can label senior management of the NYMEX/COMEX , as well as the commissioners and other high ranking employees at the CFTC as being complicit and involved in the manipulation. Incompetence can no longer be considered an explanation or excuse for them not enforcing the law. (While not the purpose of this article, I will list the e-mail addresses of the regulators at the end of this article, for those who want to make their feelings known.)

I am not writing this article in anger. I understand how many could feel angry, particularly if leveraged silver or gold positions were liquidated as a result of this sell-off. Not only does this episode confirm that these markets have been manipulated, it also strengthens my conviction that the termination of this manipulation is a certainty. The commercials know better than anyone how the markets function mechanically. This is their full-time business. They know when the markets are least liquid and when many traders are absent. Perhaps the most illiquid times, with few traders present, are in the overnight sessions. The most illiquid time is around 8 PM EST. On Thursday evening, right at that time, the price of silver suddenly plummeted by almost $1.50. It had never before fell by that amount so quickly in any overnight session.

So, how did the concentrated shorts pull that off? They waited until the most opportune time and threw in some relatively small, but aggressively placed sell orders. These sell orders caused the price to fall, touching off further sell orders from under-margined longs, which further caused prices to fall. The analogy I like to use is that it is similar to rolling a small snowball down a hill and watching it pick up size and momentum. As the sell orders began to snowball more and more, guess who was buying after prices dropped? Correct, the concentrated shorts.

How is it possible that the commercials could buy back short positions on thousands of contracts at times of steep sell-offs, without triggering a rise in price? There is only one possible and plausible explanation - through discipline and collusion. The commercials know the price levels that tech funds and other large speculators are likely to sell at on the way down. In addition, some of those large commercials do the clearing for these speculative traders. In that position, they know the finances of the large long silver traders better than anyone. The commercials know, in advance, the sell points and vulnerability levels of the longs as well as the longs themselves. So all the commercials have to do is trigger low enough prices at illiquid times in the market to manufacture an avalanche of selling. Then they sit back with low priced buy orders and wait for the desperate sellers to come to them. Previously, I have referred to the behavior of the commercials as a wolf pack. It is shocking that the regulators can permit this.

To those who claim that these are normal market games, and the commercials are market makers, let me point out that commodity law does not allow for market making. The markets are supposed to operate as an open outcry (now electronic) auction, not as a specialist system. Even assuming that the commercials operate as self-appointed market makers, what kind of legitimate market maker only caps price rises by increasing short selling. Then they create disorderly moves to the downside. That’s why all silver price rallies are contained and orderly and why we get vicious, out of control sell-offs. The commercials make markets only for their own financial benefit. Some market makers.

I promise you that I could prove this if I were privy to the trading records rather than just the CFTC and the exchange, whose mission is to look the other way. But that is impossible, so I have to prove it with public data. While the data for this Thursday-Friday sell-off won’t be available until the next COT, the last few COTs provide ample evidence to prove what I allege.

The most recent COT, for positions held as of 8/12, confirm that the commercials have been on a buying binge for the past month. In other words, they have rigged the sell-offs in silver and gold over the past month and used those sell-offs to collusively buy as many contracts as possible. The numbers are impressive. Since the COT of 7/15, the commercials have bought back and reduced their total net silver futures short position by more than 20,000 contracts (100 million ounces) In gold the commercials have bought back, as a group, more than 90,000 futures contracts, reducing their net short position by 9 million ounces. Undoubtedly, more contracts have been bought by the commercials in the current week.

In addition to this buying on the COMEX, I believe that the naked short position in shares of the silver ETF, SLV, have been bought back, either entirely or in large part over the past month. This was the plan.

However, the percentage of net buying by the concentrated shorts in COMEX silver and gold has decidedly lagged the overall pace of commercial net buying. In silver, the big 4 concentrated shorts only bought back 10%, or 2000 of the 20,000 silver contracts bought, while the raptors (the 9+ smaller commercials) bought 12,000 and the 5 thru 8 largest traders bought a bit more than the 6000 contract balance. In gold the big 4 only bought back 22%, or 20,000 of the 90,000 net contracts bought, with the raptors buying 40,000 contracts and the 5 thru 8 largest traders buying 30,000 contracts.

What this tells us, for sure, is that the concentrated short position of the big 4 in silver and gold, while somewhat reduced in total contracts over the past month, has grown more concentrated and manipulative. The big 4 in gold and silver have grown more and more isolated from the rest of the commercials and, therefore, more desperate. This fully explains the disorderly nature of the recent sell-off and will explain any further disorderliness. The very small amount of short covering by the big 4 increases the likelihood that they may be trapped in these short positions.

Remember, concentration and manipulation go hand in hand, and the more concentrated the short position becomes in silver and gold the clearer the proof of manipulation. Only those that refuse to analyze the public data and reject the very idea that silver and gold could possibly be manipulated can conclude that we are witnessing free market behavior and not a rig job. With the growing evidence of a retail investment shortage in silver, those who deny manipulation are about to look very silly.

The Retail Silver Investment Shortage

The growing and persistent retail silver investment shortage is becoming increasingly obvious. This segment makes up a small part of the total silver market on a daily basis. However, due to the large number of participants, on both the buy and sell side, the demographics elevate this segment to a more reliable barometer than daily volumes might suggest. With some 5,000 US retail dealers and perhaps 100,000 customers, there is much to learn from in this retail market.

What is happening is nothing short of astounding. For the first time in our lifetime, there is not enough silver to go around. Just about everywhere you look, dealers are sold out or low on inventories, throughout the entire supply chain. Delays in deliveries, the clearest definition of a commodity shortage, are commonplace. This is unprecedented. That this is occurring precisely at the same time of a sharp sell-off in the price of silver, should make your head spin.

I would suggest, if you have college-age children or that you borrow any basic economics textbooks they have. What you will read, is what you already know. The most basic law of supply and demand dictates that low and falling prices must be an indication of growing supplies or falling demand. You will find no suggestion that the price of anything could fall sharply with record demand, especially with the unavailability of supply. At least, not in any free market system.

Then I would suggest that you consider the only plausible explanation to silver investment shortages amid plummeting prices. That explanation is that there must be something wrong with the price of silver, not with supply or demand. After all, the actual supply or demand can’t possibly be "wrong." They are what they are. Only the price could possibly be wrong. To be exact, the price of silver is manipulated, something that I have maintained for more than two decades. The growing retail silver shortage confirms this manipulation.

I recognize that even if the true Prophet of any or all religions descended from the Heavens and certified that the price of silver (and gold) was manipulated, there would still be many who doubted it. That’s because one of the most powerful forces on the face of the earth, is the inability to admit that they may have been wrong. If that error is about something as basic as a market being free or manipulated, then the denial is likely to be more obstinate. In fact, as the evidence becomes more apparent, it’s actually quite humorous to read and listen to why the shortage doesn’t matter.

As regular readers know, the inevitability of a silver shortage (as a direct result of the long-tern manipulation) has been at the center of my message. If there is one thing upon which I have agreed with my good friend and mentor, Izzy, it is the coming shortage of silver. This has been an issue on which we have agreed for more than 20 years. But it is only recently that I have come to appreciate his true take on what shortage will mean to the price of silver. He has a perspective that few of us have, including me.

By way of review, the silver retail investment shortage emerged some six months ago, shortly after Izzy’s article extolling the advantage of buying US Silver Eagles. http://www.investmentrarities.com/12-03-07.html There is not the slightest doubt in my mind that his article jump started the huge demand for Silver Eagles and as a result the US Mint could not keep up with demand. They still can’t. Already, the Mint has sold more Silver Eagles in the first seven and a half months of this year than it sold in any full year in the 22 year history of the Eagle program. And we still have four and a half months. Clearly, Silver Eagle sales would have been higher were the Mint able to keep up with demand. I believe the demand for Silver Eagles subsequently generated sales for all retail silver investment products. Those not able to buy Eagles bought other forms that were available, until demand exceeded supply for other silver products.

Now many may doubt that a retired grandfather could write a single article that could launch a shortage of retail silver for the very first time in history, but I know better. I know that is exactly what happened. And the reason I know it is because I knew that was Izzy’s intent beforehand. Everything he wrote about the benefits of owning silver was the gospel truth. But, he also intended and set out to highlight just how tight silver supply had become by forcing the Mint into a position where they could not meet demand. He knew that the Mint couldn’t hide a shortage of Silver Eagles. There’s no way that someone sets out to accomplish such a specific objective and then achieves it by accident.

The reason I am recounting Izzy’s remarkable accomplishment is to give you a sense of the true meaning of his thoughts on the coming silver shortage. Even I raise my eyes when he offers his seemingly outrageous price projections, although I know better to dismiss anything he says. But there is something unique in his experience and background that gives him a perspective unlike most. In fact, it is a perspective one can achieve only through first hand experience.

Izzy has experienced the kind of shortages of basic goods only witnessed during war. He was present during communist take over in his native Romania. He has related to me how people would pay any price for a loaf of bread, a chicken, even a tool. You and I can’t conceive of such shortages because we have never experienced them first hand.

Perhaps you can mentally transport yourself to imagine such shortages, where price becomes secondary to availability,. If so, you may get a brief glimpse of Izzy’s vision and "crazy" price targets for silver in a time of true shortage. I can only do it for the shortest of times, before my imagination shuts down. If this persistent and growing retail shortage of silver develops into a true full-blown wholesale and industrial shortage (as I believe we may already be in), we will not be able to judge what price is truly crazy. Those most likely to gauge price correctly in a shortage may only be those who have been there and done that.

Lessons For Everyone

I realize I am running long here, but I ask your indulgence. This article is about the important lessons before us. Let me summarize the lessons to different segments of the silver market.

For investors, don’t let this opportunity slip by. I realize you are seeing something with your own eyes that you have never seen before, namely, shortages and low and sharply declining prices. This is contrary to everything you have learned and experienced. It is nothing short of extraordinary. You must rely on your common sense. Something has to give, either prices or supply. This can’t last for long. Continued low prices won’t increase supply. The only solution for shortage is higher prices. In the case of silver, sharply higher prices. Don’t hesitate in buying silver now.

Recently, I wrote that I thought silver was exceptionally low-risk, since it had fallen sharply. The price then went lower than I thought it would or could. But my basic premise is still intact, namely that the lower the price goes, the lower the remaining risk.

For those investors capable of switching gold owned into silver, this is a particularly opportune time to switch, as silver prices have been manipulated much lower than gold prices. Silver is cheaper, compared to gold, than it has been in a long time. That can’t last. Yes, gold looks cheap here and appears to be also tight on a retail supply basis, but the big difference is this; due to silver’s industrial consumption nature and deeply depleted world inventories, higher prices for silver will not cure a shortage for a long time.

Investors should recognize that the manipulative sell-off may have created the very springboard that will cause the price of silver to soar. This is not about some academic discussion on whether silver is manipulated or not. This is about identifying and taking advantage of a potential price explosion. It has been my long-held premise that before we took off to the upside, we were likely to get a super smash to the downside. I think this was the super smash.

For industrial consumers of silver, the lessons are even more compelling than for investors. That‘s because, investors don’t have to buy silver. They have the choice to buy or not buy. Users don’t have that choice, they must buy. Their only choice is when, how much, and at what price to buy silver. A few weeks ago, users were paying more than $19 an oz for silver. Since then, the price dropped more than $6. Users will not consume less silver just because the price declined.

If you know you must consume an item, price declines are the time to stock up. This is not complicated. If you consume a favorite type of coffee, when it goes on sale for 30% off, the reaction is to take advantage and buy more than you normally would. Likewise, some industrial consumers of silver will do the same. It’s called legitimate hedging, which is the economic justification of the futures markets.

A special note to users. For the past ten years or so, hedging has been a disaster for the producers who sold future production at too low of a price. But if there was one shining example of a good hedge, it was on the buy side by a user. I am speaking of Southwest Airlines, and their magnificent buy hedge of fuel. As a result of locking in low prices, those responsible for the fuel hedge are placed upon a pedestal at the company, and rightly so. Someday soon, there will be some great success stories about those users who locked in silver at current prices.

For mine producers of silver, the current sell-off presents unique risks and opportunities. Obviously, the low price presents danger to your shareholders. I don’t know of a primary miner that can operate at a profit at current silver prices. Producers can and should do something about it. At a minimum, producers should speak up about the sell-off and question its cause. They might threaten to withhold production. Such actions would meet with strong approval from shareholders. It would be a public relations bonanza. Shareholders don’t want to hear producers say everything is fine in the silver market, because they know otherwise.

A few years ago, a silver mining company, Silver Standard, appeared to take my public advice to buy some silver. The results were spectacular. Not only did the company and its CEO, Robert Quartermain, reap shareholder goodwill, it achieved a profit of roughly $25 million, when it sold the silver earlier this year above $20. I would suggest that this company (and others) take advantage of the sell-off and do it again. If they do, I think the results, both from a public relations and profit standpoint, will be even better.

Finally, the lessons to the regulators from this sell-off may be the most important of all. This year we have witnessed disorderly pricing in many markets. In oil and cotton, the disorderly markets were caused by speculator shorts, masquerading as commercials, who ran into trouble and had to buy back their short positions. While the concentrated shorts in silver and gold have not yet lost control, given the growing physical shortage in silver, it would appear to be only a matter of time.

In the meantime, the regulators are permitting a crime to remain in progress. This is shameful. Worse, I believe that their denial of the existence of a silver manipulation has, effectively, given a green light to the concentrated shorts to continue the manipulation. In other words, the CFTC is directly responsible for the recent silver and gold sell-off. That’s beyond shameful.

Any pretense that the concentrated short position in silver was somehow a legitimate hedge went out the window the minute that the price cracked below the cost of production and shortages started to develop. After all, who legitimately hedges to lock in a loss or hedges against nonexistent inventory?

Here are the e-mail addresses for the regulators. If you want to give someone a piece of your mind about the manipulation, this is a good place to start. While it may or may not do any good, it is the right thing to do, especially if you are disturbed by this manipulation, as you should be.

WLukken@cftc.gov

BChilton@cftc.gov

MDunn@cftc.gov

JSommers@cftcf.gov

Jnewsome@nymex.com

Rschaefer@nymex.com
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information...UPDATED 8/13 By kevin on 8/20/2008 6:15 PM
http://tinyurl.com/5leeu2

At the commission’s request, Alabama Attorney General Troy King appointed former U.S. Securities and Exchange Commission Chairman Harvey L. Pitt as a deputy attorney general to help investigate the case.
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information...UPDATED 8/13 By waterfallsparkles on 8/20/2008 6:17 PM
Interesting thought. I think that the SEC benifits from Naked Short selling.

Consider this. In most law suits the Firms or Wrongdoers pay a fine and admit no wrong doing. Interesting, since the fine and no admission of wrong doing lets them off the hook for Shareholder Law Suits.

Then you have to ask who gets the fine. Hmmm. Looks to me the Government gets the fine. The SEC most of the time. Why? Do they encourage infractions of the rules to raise money? Why do they always let the Firm or Party off the hook by paying a fine "TO THEM" without admitting any wrong doing? What about the Shareholders that were injured. Without admitting an wrongdoing and paying a fine they are let off the hook for any Shareholder Law Suits.

Why does the SEC profit from wrongdoing and Shareholders are still left holding the bag with no legall recourse because of the settlement with the SEC.

Does the SEC want to cause Shareholder losses to raise money for themselves thru settlements? Do the Brokers know they will get a pass for making a Billion Dollars and paying a fine of $100,000. and get off the hook for law suits from Shareholders.

It appears to me that if you follow the money you can see how the SEC benifits from Fail to Delivers, even if it causes the average Shareholder to lose substancial amounts of money. It looks to me that they have a financial interest that is greater than enforcing their rules.
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information...UPDATED 8/13 By kevin on 8/21/2008 2:02 PM
The Securities and Exchange Commission’s temporary restrictions on naked short-sales expired just over a week ago, but something much more long-term is in the works.

SEC Chairman Christopher Cox said the regulator will propose new rules covering short-selling within the “next few weeks,” and the new restrictions may go much further than the ones that expired on Aug. 12.

“Our proposals will be designed to ensure the smooth functioning of markets and to support equally the important role of bets on the upside and the downside,” Cox said.

The temporary restrictions on naked shorts put into place on July 15 covered only U.S. mortgage giants Fannie Mae and Freddie Mac, as well as 17 brokerages, in an effort to shore up those companies and protect them from market manipulation. The new rules may cover all short-selling, and not just financial names, Cox said.
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information...UPDATED 8/13 By kevin on 8/21/2008 2:05 PM
goldnsil: On the TV the SEC is talking about eliminating naked short selling in a few weeks all together. They said there are a billion shares that are sold naked short every day. Also stated is that they are ruining companies...! Also stated that the shorts are concentrated within 100 companies. I imagine they are the Financials, the precious metal companies, among others. Hopefully it goes through, the little guy retail investor needs something like this to fight the crooks.

http://tinyurl.com/5czkeh
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information...UPDATED 8/13 By Sean on 8/25/2008 8:16 PM
Cramer Tape Hits Alex Jones' Infowars...Where Is Deepcapture?
Jim Cramer Goes Off On Everybody

You Tube
August 21, 2008

Cramer calls out what he regarded to be fraudulent destruction of Freddy and Fannie, shameful actions of the FED, SEC, Treasury, and Whitehouse; the damage being done to market capitalism; and directly implies that our economy is being illegally manipulated by insiders.

http://www.infowars.com/?p=4091
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information...UPDATED 8/13 By waterfallsparkles on 8/29/2008 9:17 AM
Check out the 5 part video about Debt As Money. Watch the 1st and click on each subsequent video on the right. 1 thru 5.

The video illustrates what the problem is with the Banks and the Markets today.

Very informative.

http://www.youtube.com/watch?v=vVkFb26u9g8
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information...UPDATED 8/13 By Fred on 8/29/2008 9:20 AM
It seems simple to me. Just report the total of all long positions printed on broker statements for each stock. You don't need it broken down by broker. Just the total. Also show the total number of shares borrowed by short sellers. Then the companies report the number of shares held in DTC, not held directly by shareholders. This would clearly show the size of the unsettled trades. It would be the excess of longs less borrowed over the shares in DTC. Simple. And this is definitely within the SEC power to compel such disclosure.
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information...UPDATED 8/13 By kevin on 9/4/2008 10:07 AM
The problem with that, Fred, is how would a domestic regulator regulate Canada, Germany and other offshore jurisdictions. They have no ability to force foreign brokerages to comply and its easy for US brokerages to route orders through foreign brokerages.

For example, foreign brokerages are not members of the NASD and are not subject to its rules.
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information...UPDATED 8/13 By Sean on 9/4/2008 10:10 AM
Please read this story as it was well hidden from Pinksheets and Etrade news sources(I believe these, among others, are deliberately withholding the printing of anykind of Naked Shorting news) I found it on Yahoo Finance. Since , Bobo, Patrick, Dave Patch et al have been bringing this news to the forefront and taking the fight to these criminals, it has gotten harder to make money naked shorting the usual patsy companies, so therefore the have now gone after banks, thus we have the following..


AP
FirstFed jumps as analyst questions short selling
Thursday August 28, 5:25 pm ET
FirstFed shares climb as analyst questions whether naked short selling is affecting stock


NEW YORK (AP) -- Shares of FirstFed Financial Corp. jumped Thursday after a Keefe, Bruyette & Woods analyst questioned whether a certain type of short-selling might be affecting the stock.
Shares soared $4.03, or 34 percent, to $16.03. Shares are still down 55 percent this year.

ADVERTISEMENT


Short-sellers bet that a stock's price will fall so that they can profit from it. They borrow shares of the stock and sell them. If the price drops, they buy cheaper actual shares to cover the borrowed ones, pocketing the difference.

"Naked" short-selling occurs when sellers don't actually borrow the shares before selling them, and then look to cover positions immediately after the sale. A temporary order from the SEC banning naked short-selling of some financial stocks expired on Aug. 12.

In a note to clients, analyst Frederick Cannon said the short interest in FirstFed increased to 93 percent of outstanding shares and 108 percent of reported float shares on Aug. 12, according to the most recent report on short interest from the exchanges.

"We question whether or not this level of shares has actually been borrowed and sold short under stock exchange rules," Cannon said. "Further, this may raise the possibility of a New York Stock Exchange or Securities and Exchange Commission review of the short positions in the company."

"The KBW note stands pretty well on its own," said FirstFed Chief Financial Officer Douglas Goddard in an interview with The Associated Press. "It seems to be a pretty blatant case where (naked short-selling) may be happening."

Cannon, who maintained an "Outperform" rating and $40 target price on the stock, said there may be some effort to cover the shorts if naked short-selling is occurring, which would drive the stock up.

Then read this...

http://www.bloggingstocks.com/2008/08/30/bank-failure-count-2008s-10th-bank-failure/

Coincidence I think not. Our economy is under attack not by a credit crunch or subprime loans but by Greedy Hedgefunds looking to make a profit by hitting different sectors, one after the other. The question now is.. What sector is next??? Thanks for looking out for us SEC and our Gov. regulators.
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information...UPDATED 8/13 By msucog on 9/15/2008 3:40 PM
problem...there's a problem? i think all these market troubles were choreographed...housing market troubles equal lender troubles equal stock pps troubles equal big cash windfall for short...now what if the lender and bankers were all in on it where the money they supposedly lost had been handed around to others so then the average joe bails them out...yet they walk away with the money they "lost", profits from the shorts, and bailout monies...am i crazy or what?

http://www.startribune.com/business/28415554.html

SEC planning measures to rein in aggressive short-selling partly blamed for Lehman's demise
By MARCY GORDON , Associated Press

Last update: September 15, 2008 - 4:15 PM

WASHINGTON - With Wall Street engulfed in crisis, the Securities and Exchange Commission is planning measures to rein in aggressive forms of short-selling that were blamed in part for the demise of Lehman Brothers and which some fear could be turned against other vulnerable companies.

During emergency meetings between federal officials and investment bank executives over the weekend, SEC Chairman Christopher Cox indicated to the bankers that the agency plans in a few days to impose new permanent protections against abusive "naked" short-selling, a person familiar with the matter said Monday.

Unlike the SEC's temporary emergency ban this summer covering naked short-selling in 19 stocks, the new measures would apply to trading in the broader market. The person spoke on condition of anonymity because the SEC actions haven't yet been officially announced.

A critic of the agency said the action comes too late to stem a tide of short-selling attacks that have been felling huge companies.

The SEC measures likely would include removing an exception for market makers in options on stocks from rules restricting naked short-selling, and a tightening of anti-fraud rules related to that activity, according to the person familiar with the matter.

Those two measures could be put in place administratively by quick approval of the SEC commissioners. Another change, reducing from 13 to five the number of days that short-sellers would have to deliver stocks after an initial failure to do so, would require a public meeting and formal vote to propose it as a new rule.

Short sellers bet that a stock's price will fall so that they can profit from it. They borrow shares of the stock and sell them. If the price drops, they buy cheaper actual shares to cover the borrowed ones, pocketing the difference.

Naked short-selling occurs when sellers don't even borrow the shares before selling them, and then look to cover positions immediately after the sale.

Jim Hardesty, president and market strategist at Hardesty Capital Management in Baltimore, called the possible reduction of delivery time "a tepid little measure." He endorsed a ban on all naked short-selling similar to the one that the SEC instituted this summer on an emergency basis covering stocks of 19 major financial companies.

"We need to restore confidence in this system," Hardesty said. Hedge funds and other aggressive short sellers "are ganging up on one company after another. A company the scale of Merrill Lynch got into the clutches of those people."

Investors like Hardesty contend that naked short-selling, if left unchecked, would have given hedge funds and other aggressive short sellers an unfair advantage to attack other victims after Lehman Brothers Holdings Inc. Merrill Lynch & Co. — being bought by Bank of America Corp. in a $50 billion shotgun deal — or giant insurer American International Group Inc., which reportedly appealed to the Federal Reserve for emergency funding, were said to be among the likely targets.

Travis Larson, a spokesman for the Securities Industry and Financial Markets Association, Wall Street's biggest lobbying organization, declined to comment Monday. Spokesmen for the Managed Funds Association, a group representing hedge funds, didn't immediately return a call seeking comment.

But Steve Thel, a business law professor at Fordham University who was an attorney at the SEC, said the agency's actions are a way to limit abuses in short-selling in an orderly way without "making it hard for people to express negative opinion" about companies.

The purpose of market regulations is "not to protect incumbent management from the market's understanding of bad news," Thel said.

Investors have clamored for the SEC to institute another emergency order similar to its ban from mid-July to mid-August against naked short-selling of the stocks of mortgage finance companies Fannie Mae and Freddie Mac, and 17 large investment banks — including Lehman and Merrill.

The SEC's temporary order required short sellers to actually borrow shares before selling them. By law, it could not be extended beyond Aug. 12.

Cox has said the order helped prevent potential "distort and short" manipulation of stocks, which occurs when rumors and misinformation are used to drive down the price of a stock that has been sold short.

New York Gov. David Paterson said Monday that AIG will be allowed to use $20 billion in assets held by its subsidiaries to provide cash needed for the company to stay in business. Paterson asked state insurance regulators to essentially allow AIG to provide a bridge loan to itself.
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information... By Sean on 8/9/2008 4:33 PM
A little off topic... but

I have a very simjple question. These banks are cash strapped and have been literally borrowing monies to the tunes of 30 to 40 billion per week to exist from the Federal Reserve (better knows as the taxpayers) how can they afford to pay these enormous settlements to customers all of a sudden? Does’nt this seem fishy to you guys? Please explain it to me like I’m a five year old.
Citi 20 billion
UBS 18.6 Billion
Morgan Stanley 1.5 billion
Merrill Lynch 12 billion
Goldman???
JPM ????
Lehman????
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information... By clearthinker on 8/9/2008 9:20 PM
Now it's easy to piece together a few things. Jim Cramer comes out hard to stop naked shorting and the SEC protects 19 financial corps, most of whom need their stocks to get up higher so they can use the share price for some needed liquidity. Meanwhile, every other publicly held company continues to get hammered by naked shorting while the SEC allows them to linger on the Reg SHO list without a forced buy in....How much you wanna bet that on August 12th , there is no immediate protection for all companies, but rather some rhetoric that goes like this "blah blah blah, we need time to develop the proper language and a pubic comment period."

The SEC knew that these settlements were begin made while Cox went before the public proclaiming the need to provide emergency protection. Sure these guys need protection....they get their shares protected as they admit "no wrongdoing" but agree to buy back billions in fraudulently mis-represented securities.

Any questions?
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information... By Willie Loman on 8/9/2008 9:20 PM
Jesus H. Christ ('scuse my French). I knew the fails figure was high, but I was hoping against hope that the "real" figurer(s) would ultimately amount to much lower than even my childish imagination would allow.

Another childish bubble burst.

Okay, so the miscreants are basiically siphoning off anything worth scrounging before the sh*t really hits the fan, when international creditors come to collect, ya? Or am I reading this wrong? Rome was basically sacked under the same sort of pretense, if I'm not mistaken....

God help us all.
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information... By bobo on 8/9/2008 9:23 PM
The really scary part is that the first piece cited, is circa around 2000, before the problem got really huge. As in, $1.8 trillion is the very low end of the international problem from 8 years ago. It is at least twice as large now.

Is that bad, when 30% of the world's GNP is stolen? As in, say, $3 trillion of buyer money is taken, but nothing is delivered in return? Because if that isn't bad, then what precisely is?
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information... By waterfallsparkles on 8/10/2008 9:03 AM
Listen to this. It really explains Naked Short selling. Follow up to Bloomberg piece on Naked Shorting.

www.netcastdaily.com/broadcast/fsn2008-712-2asx If this does not work there is a link on the ABK message board under Bud Burrell The Greatest Crime In History.
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information... By clearthinker on 8/10/2008 10:39 AM
What is most scary to me is that IN BROAD DAYLIGHT, Chris Cox protected 19 companies, the market (unable to short them) bid the prices higher while the companies, one by one announce deals to buy back BILLIONS of fraudulently mis-represented securities, without admission of wrongdoing and NOT ONE INDIVIDUAL IS NAMED.

There's no discovery needed, folks, it's all happening right under the noses of our enforcement people. Let's see if they do anything......
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information... By the big stall on 8/10/2008 3:13 PM
Activists have been fighting stock counterfeiting for at least 34 years when Richard Ney wrote "the Wallstreet Gang" and at least 78 years since the Pecora hearings. Nothing ever happens because the people running the printing press run this country.

Naked shorting became big news in 2000 when news of "Operation Bermuda Short" hit the wires.

http://www.rgm.com/articles/tk2.html

Hunter Carr made the news when he sued in 2002

http://www.rgm.com/articles/predatororprey.html

Dozens of others have sued since, without success.

Then stockgate hit with the "National Association Against Naked Short Selling". RGM began the fight as did Burrell and our own bunny.

Recent History Since 2000:

- companies exercised their right to exit the DTC and self-clear through their transfer agent and the SEC came up with a new rule banning it

- In 2003, the BBX was announced, which was supposed to replace the OTC and get rid of naked short selling. The SEC canned it weeks before it was to launch after companies had spent millions getting ready for it

- heavily shorted companies were listed against their permission in Berlin to take advantage of shorting loopholes and the SEC assured there was no shorting from Berlin

- the NASD came up with a rule banning their members from dealing with foreign brokerages that failed to deliver and the SEC killed the rule at the last minute, saying that they would come up with SRO, which would be better.

- over a year later, SHO launched and the SEC gutted it with a grandfather provision

- they promise to fix SHO, but leave so many exemptions it is still useless

The SEC has killed every rule that has worked and has been stalling on behalf of the industry since the 1930's. They've lied on behalf of the industry for years and have no intention of ever protecting investors from Wallstreet's dirty little counterfeit secret.

After all they have $1.5 trillion reasons to turn a blind eye.
Re: How Big is the Failure to Deliver/Naked Shorting Problem? Yet More Information... By rmr on 8/10/2008 3:15 PM
More stalling and total BS from feckless SEC.

‘Naked’ short-selling rule set to expire
By Joanna Chung in New York
Published: August 10 2008 18:34 | Last updated: August 10 2008 18:34
An emergency measure protecting a select group of financial stocks from abusive short-selling expires on Tuesday, probably leaving at least a two-month gap before a similar rule, currently being considered, is imposed.

The US Securities and Exchange Commission has said that it would not extend the rule preventing “naked” short-selling in shares of 19 key financial entities, including mortgage groups Fannie Mae and Freddie Mac, and big Wall Street firms that include investment bank Lehman Brothers.

EDITOR’S CHOICE
In depth: Short-selling - Jul-17
Lex: Short measures - Jul-27
Short-sellers caught out by higher costs - Jul-16
Lex: Naked shorts - Jul-16
Confusion over UK rules on shorting - Jul-06
‘No action’ by FSA after abuse probe - Jun-22
Instead, its staff is drawing up new proposals to guard against abusive short-selling in shares across the entire market.

However, it is likely to be a couple of weeks before they are proposed, followed by a public comment period of at least 30 days. Several ideas are being studied, including the requirement that is at the heart of the emergency rule.

Short-sellers aim to profit from share declines, usually by borrowing a stock, selling it and buying it back after its price has decreased. In “naked” short-selling, the shares are sold without being borrowed first. The emergency rule requires investors to borrow the security first and deliver at settlement.

The rule slowed down trading, some market participants said, because most traders had to make pre-borrow arrangements manually for the 19 shares. But any new pre-borrow requirement rule, which would involve collecting public comment, is unlikely to be imposed for at least two months, according to SEC officials.

Other ideas, however, could be adopted earlier – at the time proposals are issued – including a requirement to disclose substantial short pos