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Article: Naked short sales and fails-to-deliver An overview of clearing and settlement procedures for stock trades in the USA

Article - Academic

Naked short sales and fails-to-deliver: An overview of clearing and settlement procedures for stock trades in the USA

Tālis Putniņš

Journal of Securities Operations & Custody, 1 January 2010

This paper outlines the process of clearing and settlement for stock trades in the USA. It pays particular attention to what happens when the seller of a stock fails to deliver that stock at settlement and describes the mechanisms to resolve delivery failures. Fails-to-deliver can occur for a number of reasons, such as human error, administrative delays and the controversial practice of naked short selling. This paper helps understand the implications of naked short selling for trade counterparties and, more generally, the effects of naked short selling on the clearing and settlement system.

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Article: Meet The Sith Lords: The 20 People Alleged To Be Part Of A Shadowy Short-Selling Conspiracy

Article - Media

Meet The Sith Lords: The 20 People Alleged To Be Part Of A Shadowy Short-Selling Conspiracy

Kamelia Angelova

Business Insider, 18 December 2009

Last week, a list of journalists appeared on the internet, along with every single one of their Facebook friends.

The list, which included John Carney, Henry Blodget, and Joe Weisenthal, was assembled by the folks at Deepcapture.com, anti-naked short selling site affiliated with Overstock.com CEO Patrick Byrne.

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Web: Patrick Byrne, Facing Dilemma, Lashes Out at Penson Financial

Web

Patrick Byrne, Facing Dilemma, Lashes Out at Penson Financial

Gary Weiss

gary-weiss.com, 9 October 2009

Sam Antar today describes the serious dilemma facing Patrick Byrne, the wacky CEO of Overstock.com. Thanks to an SEC investigation instigated by Sam, who has posted frequently about how Overstock has systematically inflated its financial statements, Byrne is caught between the proverbial rock and a hard place.

He has to either restate Overstock’s recent earnings–including a much-ballyhooed “profit” in the fourth quarter that was actually a loss–or wait until the SEC forces him to do so.

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Web: Byrne: SEC Enforcement Division Takes Orders From Short-Sellers

Web

Byrne: SEC Enforcement Division Takes Orders From Short-Sellers

Gary Weiss

gary-weiss.com, 19 September 2009

Patrick Byrne has a new conspiracy theory to explain why his corporate crime petri dish Overstock.com is under investigation by the SEC. Seems that short sellers, in addition to having a fax machine at CNBC, also have a hotline to the SEC, in which they bark out orders to start investigations against innocent CEOs like Byrne.

Byrne made that comment on Fox Business News, where he is trotted out as an “internet retailing expert,” no doubt because of the skill at which he has eased Overstock into negative shareholder equity. He was brought out this time for a ritual denunciation of new bank compensation rules.

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Article: Judge Rejects Settlement Over Merrill Bonuses

Article - Media

Judge Rejects Settlement Over Merrill Bonuses

Zachary Kouwe

New York Times, 14 September 2009

As President Obama traveled to Wall Street on Monday and chided bankers for their recklessness, across town a federal judge issued a far sharper rebuke, not just for some of the financiers but for their regulators in Washington as well.

Giving voice to the anger and frustration of many ordinary Americans, Judge Jed S. Rakoff issued a scathing ruling on one of the watershed moments of the financial crisis: the star-crossed takeover of Merrill Lynch by the now-struggling Bank of America.

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Article: How Dendreon Is Proving Short Sellers Wrong

Article - Media

How Dendreon Is Proving Short Sellers Wrong

Gary Weiss

Seeking Alpha, 18 August 2009

In other words, Dendreon is not like the third-rate Internet retailer Overstock.com (NASDAQ:OSTK), whose wack-a-doo CEO Patrick Byrne has been weaving wild conspiracy theories over naked short selling for years, ever since it dawned on him that he simply does not know how to run a company. His talents, to the extent he has any, lie elsewhere (standup comedy?), but he has never eked out a profit for his company. His recent announcement of tiny fourth quarter profits was achieved by accounting gimmickry.

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Notice: SEC Takes Steps to Curtail Abusive Short Sales and Increase Market Transparency

Notice

SEC Takes Steps to Curtail Abusive Short Sales and Increase Market Transparency

SEC, 27 July 2009

The Securities and Exchange Commission today announced several actions that would protect against abusive short sales and make more short sale information available to the public.

“Today’s actions demonstrate the Commission’s determination to address short selling abuses while at the same time increasing public disclosure of short selling activities that affect our markets,” said SEC Chairman Mary Schapiro.

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Paper: Naked Short Selling: The Emperor’s New Clothes?

Paper

Naked Short Selling: The Emperor’s New Clothes?

Veljko Fotak, Vikas Raman, Pradeep K. Yadav

University of Oregon, 6 July 2009

Regulatory and media concern has focused heavily on the potentially manipulative distortion of market prices associated with naked short selling. However, naked shorting can also have beneficial effects for liquidity and pricing efficiency. We empirically investigate the impact of naked short-selling on market quality, and find that naked shorting leads to significant reduction in positive pricing errors, the volatility of stock price returns, bid-ask spreads, and pricing error volatility. We study naked shorting surrounding the demise of financial institutions hardest hit by the financial crisis in 2008 and find no evidence that stock price declines were caused by naked shorting.

PDF (51 pages): Naked Short Selling: The Emperor’s New Clothes?

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Letter: From Dan Mathisson to SEC

Letter

From Dan Mathisson to SEC

16 June 2009

Credit Suisse welcomes the opportunity to comment on the proposed amendments to Regulation
SHO (the “Release”) of the Securities and Exchange Commission (the “Commission” or “SEC”),
which would impose “price test” restrictions on short selling in the U.S. equities markets.

PDF (18 pages): From Dan Mathisson to SEC

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Article: Watchdog Alleges Insider Trading At SEC

Article - Media

Watchdog Alleges Insider Trading At SEC

Liz Moyer

Forbes, 15 May 2009

The Securities and Exchange Commission is back under fire after the agency’s own watchdog alleged suspicious trading activity and possible insider trading by two staff attorneys.

SEC Inspector General David Kotz says he’s referred his findings to the Department of Justice, which he says is investigating along with the Federal Bureau of Investigation. As is its standard practice, the DOJ would neither confirm nor deny they are looking into the matter.

The report, dated March 3, details a two-year investigation of two SEC enforcement staff attorneys who may have traded on non-public information or engaging in insider trading in stocks of companies under investigation by the agency.

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Article: Goodbye to Naked Shorting

Article - Media

Goodbye to Naked Shorting

Floyd Norris

The New York Times, 30 April 2009

Naked short-selling.

In some circles, those are fighting words. There are companies that blame all their problems on that kind of trading, which is illegal if it is intended to manipulate the market. There are claims that it has destroyed thousands of public companies, although those making the claims have trouble naming any such companies.

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Article: Mechanics of short selling, naked short selling and synthetic short selling

Article - Media

Mechanics of short selling, naked short selling and synthetic short selling

John Olagues

321gold, 16 April 2009

There is much in the media these days about short selling, naked short selling and the “uptick rule.” Some claim that naked short sellers collude with “Rumor Mongers” to collapse stock like Bear Stearns, Lehman Brothers and so on. There is little in the media about the specific mechanics of short selling or the concept of synthetic short selling.

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Article: Ban on Naked Short-Selling in the U.S.

Article - Media

Ban on Naked Short-Selling in the U.S.

InBrief, 15 April 2009

It appears that the ban imposed by the United States Securities and Exchange Commission on naked short-selling will be permanent. It is unlikely that Canadian regulators will alter the rules with respect to short-selling because the imperatives for further regulatory action do not appear as compelling in Canada. What is the Essence of Naked Short-selling?

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Article: Our Watchdogs and the Financial Scandal of the Century

Article - Media

Our Watchdogs and the Financial Scandal of the Century

Mark Mitchell

Deep Capture, 3 April 2009

“Accountability – Integrity – Reliability”

That’s the motto of the Government Accountability Office, and it almost makes you believe that there really is a functioning watchdog – somebody, aside from us Internet loons, to investigate and report on the incompetence and malfeasance that pervade our public institutions.

Certainly, there were high hopes when the GAO began investigating the Securities and Exchange Commission’s oversight of the Depository Trust and Clearing Corporation (DTCC), a black box Wall Street outfit that is at the center of one of the great financial scandals of our era.

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