I have a challenge for all the fine folks in the media who take the stance that NSS is not pervasive, and destructive of property rights, and a widespread fraud being perpetrated on the American investing public.
Let’s deal with one issue at a time. First, let's try the notion that it isn't a big problem - that it is not really happening much.
I challenge you to go out and buy 1000 shares each of OSTK, NFI, and NAVR. Request paper certificates, and buy 10 puts to cover your downside. Do so in a way that is covert, so if you are a "name", it isn't obvious that you are doing this experiment.
Then do the same for MSFT.
Report back to us how long the experience took.
It strikes me that all the media and such who position the issue as a non-issue can do so for only one reason – the SEC and DTCC refuse to provide any data, thereby creating an industry-wide deniability factor. If there was transparency, there wouldn’t be anything to talk about.
I maintain that secrecy is driven by the DTCC, whose broker/dealer owners want to keep the actual lay of the land secret. They seek to obfuscate via secrecy and intermediation the true functioning of the “industry within and industry” that is abusive failing to deliver. If brokerage statements were forced to disclose that the IOUs in them had no voting rights or other parcel of rights of a legitimate share, investors would justifiably want to know why their cash had been debited prior to any good form delivery of shares. Same for shares lent via the Stock Borrow Program – if investors were notified that there were no longer any shares in their account, there would be pandemonium.
If investors knew that the DTCC took the position that they are a SRO, with all of the protections from suits, etc. an SRO has, and yet refuses to police the ex-clearing “Securities arrangements” that allow for virtually indefinite fails between conspiring brokers (stating that they are powerless to regulate those arrangements), they would be drawn and quartered. Ditto for claiming that they are powerless to buy-in fails. Newsflash - policing your participants means more than running interference for them and lending virtually unlimited amount of stock via the SBP – it also involves reining them in, and policing their behavior – sort of tough to do to your owners, I’ll be the first to admit.
I would propose that you fine media pundits read the comprehensive analysis of the DTCC’s performance under 17A, in Dr. DeCosta’s blog, and ask yourselves how that state of affairs can be. How did the interests of investors get so undermined by the industry dependent upon their money?
As for the apologists in the media, buy the stocks – a basket of SHO list companies – and buy a blue-chip to set a baseline.
I keep hearing the facile and silly excuse that all those delivery failures could be innocent. Sure they could. And the other, well-documented examples of Wall Street larceny could have been innocent, too. Which is what everyone claimed, until they were shown to be crooked. The S&L crisis was defended by the Reagan administration, by most regulators, by elected officials, as having innocent possible explanations for all those insolvent S&Ls. Which sat well, until it blew up, and the public discovered that our elected officials and our regulators had lied to us, because they were paid off by the crooks. Ditto for media coverage of that crisis – not a discouraging word was to be heard from the press until the bombs went off – then, suddenly, there was outrage.
This is the same gamebook being played.
So my challenge is simple. You claim there’s no problem. Go buy a basket of SHO list stocks, and report on the time it takes to get good form delivery. We know from Byrne’s experience that it takes over 2 months for OSTK. My hunch is it is at least that long for some of the others.
Want to bet that nobody runs this little experiment?
Because hear no evil, speak no evil is the order of the day.
Just keep repeating after me: There is no problem, we shouldn’t know the data, trades don’t need to settle….