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Paper: Regulation of Naked Short Selling by Congressional Research Service

Paper

Regulation of Naked Short Selling

Name Redacted

Congressional Research Service, 31 July 2009

Until the current financial crisis, the SEC did not view short selling of large, blue-chip stocks as a problem. In July 2008, however, the SEC temporarily banned naked short sales of the stock of Fannie Mae, Freddie Mac, and 17 other large financial institutions. On September 18, 2008, the SEC banned all short selling of the shares of more than 700 financial companies in an emergency action that expired on October 8, 2008. On October 1, 2008, the SEC adopted an interim rule requiring short sellers’ brokers to actually borrow shares to deliver to buyers, within one day after the expiration the normal three-day settlement time frame. The rule was made permanent on July 27, 2009, and it applies to all stocks. This report will be updated as events warrant.

Full Text Online with Links

PDF (10 Pages): Paper CRS Regulation on Naked Short Selling

 

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Article: Mad Mail: Cramer Talks Naked Short Selling

Article - Media, Publications

Mad Mail: Cramer Talks Naked Short Selling

Tom Brennan, 28 July 2009

Cramer says: “Senator Kaufman (of Delaware) was on … he called for exactly this issue on the naked shorting … I thought that was great. That was a good first step. And they have not defeated the uptick rule. Let’s hope they go and roll everything back. There’s lots of chatter that says it doesn’t matter. These are people who have never traded before. If you traded before, you know that it slows things down, gives the market a chance to catch its breath. And that’s what we want.”

Continue reading “Article: Mad Mail: Cramer Talks Naked Short Selling”

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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.

Read full notice.

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Article: A Solution to Naked Short Selling?

Article - Media, Publications

A Solution to Naked Short Selling?

Tom Brennan, 23 July 2009

Cramer has railed against naked short selling throughout the entire credit crisis. And he’s been quick to blame the collapse of at least a couple of the market’s bellwether companies on the traders who do it. Luckily for the rest of us, it looks like a group of US senators have found a solution to the problem.

Continue reading “Article: A Solution to Naked Short Selling?”

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Article: Dendreon & Deceit: Jim Cramer, Pequot Capital

Article - Media, Publications

Dendreon & Deceit: Jim Cramer, Pequot Capital

Mark Mitchell, 19 July 2009

The CNBC “journalist” assured his viewers that the FDA advisory panel would vote that Dendreon’s treatment for prostate cancer was neither safe nor effective (notwithstanding the fact that the FDA had given the treatment “priority review” status because Provenge had shown strong trial results and was destined for critically ill patients).

Continue reading “Article: Dendreon & Deceit: Jim Cramer, Pequot Capital”

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Article: Law Firm Files Class Action Lawsuit Against Manulife Financial

Article - Media, Publications

Law Firm Files Class Action Lawsuit Against Manulife Financial

Datamonitor via COMTEX, 13 July 2009

Abbey Spanier Rodd & Abrams has filed a class action lawsuit in the US District Court for the Southern District of New York on behalf of a class consisting of all persons or entities who purchased the securities of Manulife Financial between March 28, 2008 and June 22, 2009. The complaint charged Manulife and certain of the company’s executive officers with violations of federal securities laws. On June 19, 2009, after the market closed, Manulife received an enforcement notice from the Ontario Securities Commission (OSC) relating to its disclosure of risks concerning its variable annuity guarantee and segregated funds business.
Continue reading “Article: Law Firm Files Class Action Lawsuit Against Manulife Financial”

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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.

Read full article.

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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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Article: How Wall Street Is Using the Bailout to Stage a Revolution

Article - Media

How Wall Street Is Using the Bailout to Stage a Revolution

Matt Taibbi

Rolling Stone, 2 April 2009

It’s over – we’re officially, royally fucked. no empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far. It happened when Treasury Secretary Timothy Geithner was forced to admit that he was once again going to have to stuff billions of taxpayer dollars into a dying insurance giant called AIG, itself a profound symbol of our national decline – a corporation that got rich insuring the concrete and steel of American industry in the country’s heyday, only to destroy itself chasing phantom fortunes at the Wall Street card tables, like a dissolute nobleman gambling away the family estate in the waning days of the British Empire.

Read full article.